Canada: Real GDP Shrank 0.1% In August

– In August, real GDP shrank 0.1%. Weakness was relatively broad based with only eight of the 19 sectors showing gains–the worst such ratio since the last recession. Goods production fell sharply (-0.5%) after increasing 0.2% the month before. Among the goodsproducing sectors, utilities (-0.8%), mining and oil and gas extraction (-0.7%) and manufacturing (-0.6%) were the worst performers.

Temporary shutdowns contributed to the weakness in mining. Agriculture (+0.7%) provided some offset. Industrial production contracted 0.7% after swelling 0.3% the previous month. Durable goods manufacturing decreased (-1.3%) while production of nondurable goods (+0.3%) rose in the month. Among the service-producing sectors, wholesale trade (+1.0%) was the top performer while retail trade lagged behind (-0.5%). Overall, the service sector was flat in the month.

Based on the first two months of data, GDP growth is tracking at an annualized 0.6% in 2012Q3. September’s reading needs to be strong if GDP is to top the BoC’s October MPR projection of 1.0% for the quarter.

The Canadian job report was weaker than expected in October with a gain of only 1.8K. This comes on the heels of a 52.1K surge the previous month. Full-time jobs were up 7.3K while part-time jobs decreased 5.5K. Employment in the goods-producing sector was down 19.3K following a large gain in September (34.5K). Within this sector, construction was the top performer (+3.5K) while agriculture brought up the rear (-12.7K).

The service producing sector posted a gain of 21.0K after advancing 17.6K the month before. In this sector, educational services (+16.2K) were the top performer while accommodation and food services (-17.1K) were the worst. Five provinces saw employment progress. Quebec recorded the largest gain (+20.1K) while British Columbia (-10.9K) and Ontario (-9.9K) were at the back of the pack. The national unemployment rate remained unchanged at 7.4%.

Private-sector employment registered a fourth decline in six months (-21k). Looking forward, with TSX-listed corporate earnings down 30% so far in Q3, we do not expect a hiring spree in the private sector anytime soon. Instead, labour market conditions are likely to remain difficult in the coming months.

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