Real manufacturing GDP has decreased 1.1% over the last 12 months, as the sector continues to be hampered by higher borrowing costs and the ongoing post-COVID shift to spending on services. PHOTO by Pexels.
The Canadian economy yet again surprised forecasters, expanding at an annualized rate of 3.1% in the first quarter of 2023.
This was the fastest pace of growth since the second quarter of 2022.
“The Canadian economy started the year on a solid footing, and it had a little bit more momentum heading into the second quarter than was widely expected. As of now, it looks like real GDP will post modest growth in Q2, despite the negative impacts of the public service strike and Alberta wildfires,” commented Alan Arcand, chief economist with Canadian Manufacturers and Exporters. “While most analysts still think that the Bank of Canada will keep its key interest rate steady next week, it may be compelled to hike again during the summer if the economic data continue to surprise on the upside.”
Exports of goods and services rose 10.1% at an annualized rate in the first quarter of 2023, led by passenger cars and light trucks. With imports coming in at a relatively flat 0.9%, net trade was a big growth driver in Q1.. Durable goods spending was particularly strong, boosted by motor vehicle purchases—a good sign for the many metalworking job shops tied to the automotive industry.
REAL GDP UNCHANGED IN MARCH
Looking at the latest monthly data, real GDP was essentially unchanged in March, following a 0.1% gain in February. A preliminary estimate indicates that real GDP increased 0.2% in April.
After increasing in the previous two months, manufacturing activity contracted 0.6% in March, the biggest decline among 20 major industries. As a result, real manufacturing GDP has decreased 1.1% over the last 12 months, as the sector continues to be hampered by higher borrowing costs and the ongoing post-COVID shift to spending on services, Arcand points out.
Output was down in 7 of 11 major subsectors in March. The machinery industry contributed the most to the decline, with output dropping by 2.9% in March. The decrease was largely attributable to the agricultural, construction and mining machinery manufacturing industry. Fabricated metal manufacturing was down 2.1% in March.