December records marginal growth in GDP but transportation and warehousing do well

by Canadian Shipper

Continued weakness in manufacturing held the gross domestic product to a 0.2 percent gain in December, according to Statistics Canada.

Although that’s meagre growth, it’s still growth, which means that for at least another month the hounds of recession have been kept at bay. Looking at the numbers from a quarterly standpoint, growth in real gross domestic product slowed to 0.6 percent in the fourth quarter, after increasing at an average quarterly rate of 1.2 percent since mid-1998. The level of final domestic demand was virtually unchanged following several quarters of solid growth, and export growth slowed further to 0.3 percent.

And it’s also important to remember that although the year ended with a whimper it will certainly be remembered with a bang. The economy recorded its strongest gain in six years in 2000, growth that was largely driven by industries producing computer and telecommunication goods and services.

"Manufacturers played a key role in pushing economic output higher, as spectacular gains by producers of electronic goods towered above a broad-based advance by most other industry groups. A gain by business service providers could partly be attributed to strong growth at firms providing computer consulting services. Communications services activity also rose briskly, driven by increased demand for the expanding services provided by telephone carriers," Stastistics Canada reports. "Elsewhere, mining production rebounded strongly in tandem with oil and gas prices. Output in the volatile drilling and rigging industry rose 43.1 percent, accounting for almost two-thirds of the mining sector’s overall advance."

And there’s still good news for the transportation and warehousing industries, which were buoyed by higher exports of wheat and natural gas in December.

Output in the transportation and warehousing sector rose 1.5 percent in December. An increase in foreign demand for wheat, after a lull in November, led to increased activity at grain elevators and contributed to an advance in the railway industry. Pipeline operators, buttressed by new productive capacity, reported a substantial increase in activity. Natural gas exports rose sharply in December to meet surging demand from the United States.

Excluding the manufacturing sector, output in the rest of the economy rose a more substantial 0.4 percent in December, Statistics Canada records indicate.

According to the government stats watchdog, a second sharp drop in the production of telecommunications equipment and a further decline in automotive production continued to plague manufacturers in December. A majority of the major industry groups in the manufacturing sector reported declines. Forestry companies continued to scale back their logging activities, as a glut in wood product markets showed no sign of easing.

"Total manufacturing output fell for the third time in four months, decreasing 0.7 percent in December," Statistics Canada states in its Daily report. " Manufacturers’ inventories have generally been rising at a faster rate than their shipments since June, the accumulation of inventories in producers’ warehouses being a further indication of easing demand. This phenomenon was most pronounced at plants making automotive parts and accessories, primary steel products and wood products."

December’s decline was broad-based: 14 of 22 major industrial groups, accounting for about 65 percent of total manufacturing output, curtailed production. In particular, primary metal, paper and rubber production weakened in December. The largest increases in output were in the food and textile product manufacturing industries.

Manufacturing of electrical and electronic parts was essentially unchanged in December, extending a period of lacklustre growth that began in September. Telecommunications equipment manufacturers continued to suffer from declining demand, leading to a 10.4% drop in production, the third decline in four months. This was offset by higher output of communications components and electronic parts, computers and peripherals, and fibre optic products, as these producers rounded out the year with strong gains.

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