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Statistics Canada reported Monday that real Gross Domestic Product (GDP) increased 1.5% in the first quarter of 2010, after growing 1.2% in the fourth quarter of 2009. Final domestic demand advanced 1.1% as spending on housing as well as consumer goods and services continued to grow. Real GDP increased 0.6% in March, a seventh consecutive monthly advance.
Production grew faster in the first quarter of 2010 than in the fourth quarter of 2009, and inventory levels rose after being drawn down in all four quarters of 2009.
Residential investment increased for a fourth consecutive quarter, as did consumer spending on goods and services. Export and import volumes both rose for a third consecutive quarter, with growth in imports outpacing growth in exports in the first quarter.
Expressed at an annualized rate, real GDP grew 6.1% in the first quarter after advancing 4.9% in the fourth quarter of 2009. These numbers compare very favourably to the 3.0% first quarter rate of increase in the US economy.
The output of the goods-producing industries (+2.7%) increased for a second consecutive quarter, mainly on the strength of manufacturing and, to a lesser extent, construction and mining. In manufacturing, the gains were widespread, with durable and non-durable goods advancing 5.9% and 2.1% respectively. Services-producing industries (+1.1%) continued to rise, with wholesale and retail trade leading the way.
Consumers increased their spending on goods and services by 1.1% in the first quarter of 2010, following a 1.0% gain in the fourth quarter. Household spending on semi-durable goods advanced, particularly for clothing, footwear, and accessories. Expenditure on new motor vehicles grew, but at a much slower pace than in the previous three quarters. Spending on services was up 0.7%, after advancing 1.0% in the fourth quarter.
Investment in residential structures increased 5.4%, the fourth consecutive quarterly gain in this activity. New housing construction (+11%) pushed investment higher, while renovation activity was up 6.3%. February 1 was the deadline for expenditures to quality for the federal government’s Home Renovation Tax Credit.
Ownership transfer costs related to housing resale activity declined for the first time since the fourth quarter of 2008. Transfer costs grew 57% over the last three quarters of 2009.
Nominal mortgage borrowing by households was up sharply in the first quarter, recording its fourth consecutive quarterly advance.
For more information, or to inquire about the concepts, methods or data quality of this release, contact Statistics Canada Information Officer (613-951-3640, iead...@statcan.gc.ca), Income and Expenditure Accounts Division.
Canadian Consumers are more Confdent but less Capable
by Benjamin Tal
Senior Economist
The Canadian consumer turned in another strong performance in the fourth quarter, as real personal spending climbed by nearly 4% annualized. But a closer look at the data reveals that the recent surge in spending is not backed up by rising consumer fundamentals. In fact, the “V-shaped” recovery in consumer confidence that we have seen throughout the second half of 2009, has actually coincided with a drop in the ability of households to spend.
After reaching a 15-year low in late 2008, consumer confidence, as measured by the Conference Board’s Consumer Confidence Index, has improved by 60%, and is now back to its long-term average. Although still almost 20% below its 2007 peak, it is in a much better position than the corresponding measure south of the border, where consumer confidence is now almost 60% below the level seen in late 2007.
The improving mood of Canadian shoppers over the past few months led to a jump in real consumer spending over the second half of 2009. But while improved sentiment can provide a short-term lift to household spending, a sustainable boost in activity must eventually be backed up by improving consumer fundamentals such as income growth, falling unemployment and reduced debt burdens. To get a better sense of the trajectory of these household fundamentals, we looked at seven key macro-economic factors to construct a proprietary Consumer Capability Index.
Unlike a confidence survey which is based on the results of a subjective survey, this measure does not address the self- reported mood of Canadians, but rather their objective capacity to continue spending. The goal of this indicator is to shed light on consumers’ ability to spend as opposed to their willingness to spend.
Read the rest of the report here:
http://research.cibcwm.com/economic_public/download/feature3.pdf