Statistics Canada has just released the economic accounts for the second quarter of 2010.

Real gross domestic product (GDP) grew by 0.5% in the second quarter, after increasing by 1.4% in the first quarter. Final domestic demand advanced 0.9%, led by business investment in machinery and equipment. Real GDP increased by 0.2% in June.

Consumer expenditures on goods and services, as well as business investment on residential structures, grew at a slower rate than in the first quarter.

Export and import volumes both rose, with growth in imports outpacing growth in exports for a second consecutive quarter.

Expressed at an annualized rate, real GDP grew 2.0% in the second quarter, after expanding by 5.8% in the first quarter. This compared with a 1.6% second quarter rate of increase in the US economy.

The output of the goods-producing industries rose 1.9%, while that of the services industries edged up 0.1%. This marks the third consecutive quarter in which the output of the goods-producing industries has significantly outpaced that of the services industries.

Consumer spending on goods and services advanced 0.7% in the second quarter, slowing from the 1.0% gain recorded in the first quarter. Spending on both durable and semi-durable goods declined.

Expenditures on new and used motor vehicles fell 2.9%. Households spent less on electricity and natural gas for a second consecutive quarter.

Spending on furniture, furnishings, and household equipment and maintenance edged up 0.1%. Consumers had increased their expenditures on this category of goods and services by at least 1.0% in each of the three previous quarters.

Spending on services rose 1.2%, after advancing 0.7% in the first quarter. Growth in spending by Canadians travelling abroad, together with purchased transportation, contributed significantly to the increase in consumer spending on services.

Meanwhile, housing investment grew 0.3% in the second quarter, the slowest quarterly rate of increase since the first quarter of 2009. Renovation activity was down 0.8%, following four consecutive quarters of growth. Expenditure on ownership transfer costs related to housing resale activity declined for a second consecutive quarter, after recording large gains through most of 2009.

Investment in new housing construction (+6.9%) continued to advance, the third consecutive quarterly gain of over 6.0%.

Business investment in plant and equipment expanded 3.5%, the largest quarterly gain since 2005. The advance was due mainly to a 6.7% increase in spending on machinery and equipment. Investment in computers and other office equipment (+19.3%) and in industrial machinery (+12.6%) led the second-quarter gain.

Exports of goods and services grew 1.5%, the fourth consecutive quarterly gain. Increases in exports of automotive products (+12.8%) and exports of machinery and equipment (+6.2%) were the main contributors to growth in goods exports. Exports of services, notably commercial services, also continued to advance.

Imports of goods and services were up 3.9%, also the fourth consecutive quarterly increase. Machinery and equipment (+8.7%) and industrial goods and materials (+4.9%) contributed the most to the increase in imported goods, while travel services (+6.8%) led the growth in imported services.

Businesses accumulated $13 billion in inventories in the second quarter, following an accumulation of $6 billion in the first quarter. This was in contrast to the reduction of inventories recorded in each quarter of 2009.

Manufacturers’ inventories increased for the first time since the fourth quarter of 2008. Inventories in both retail and wholesale trade also rose.

Agricultural inventories fell for a second consecutive quarter as exports of grains and cattle remained strong.

The economy-wide ratio of stock to sales remained unchanged from the previous quarter. Businesses held inventories equivalent to 65 days of sales.

The price of goods and services produced in Canada rose 0.2% in the second quarter. Price increases for coal and iron ore were largely offset by price declines for crude petroleum and motor fuels and lubricants.

Overall, the price of final domestic demand was up 0.1%. The price of government current expenditure on goods and services increased in the second quarter, as did the price of both residential and non-residential structures.

The price of consumer goods and services declined 0.1%. This was the first decline in the price of consumer goods and services since the fourth quarter of 2008. A decrease in the price of motor fuels and lubricants was a major contributor to the second quarter decline.

Canada’s real gross domestic income, a measure of purchasing power, grew 0.5% in the second quarter, the fourth consecutive quarter of growth. This gain mirrors the change in GDP, as Canada’s terms of trade (a measure of export prices relative to import prices) were very similar to those of the previous quarter.

Total funds raised by domestic non-financial sectors reached $273 billion in the second quarter, up from $222 billion in the first quarter.

The increase in financing was concentrated in the government sector. Borrowing by all levels of government increased in the second quarter. This was led by bond issuances by federal and provincial governments.

Funds raised by non-financial private corporations advanced to $64 billion. Borrowing through loans increased by $21 billion, the first increase in loans since the fourth quarter of 2008, while bond issuances declined.

Household borrowing eased from $102 billion in the first quarter to $91 billion in the second quarter, in contrast to the upward trend in borrowing seen in previous quarters. Lower consumer credit and mortgage borrowing accounted for most of the decline in the second quarter.

The non-resident sector continued to be a net lender to the domestic economy in the second quarter. This lending reflects Canada’s quarterly current account deficit, which has continued since the fourth quarter of 2008. Most of these funds were provided to the Canadian economy in the form of purchases of government securities and acquisitions of corporate shares.

Additional data tables are available in the Canadian Economic Accounts Quarterly Review.

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Tags: Consumer, Economy, Expenditures, GDP, housing investment, spending, Statistics Canada