Economic activity slumps in June

Economic activity receded 0.2% in June, largely erasing a 0.3% gain in May, reports Statistics Canada.

It was the economy’s largest monthly decline in more than a year and reflective of second quarter GDP growth that came in at a disappointing 0.1%..

A decline in production lowered output in the goods sector to levels last seen in February 2000. Another sharp drop in electronic products manufacturing, a lowering in mining exploration activity and a decline in public sector services output accounted for the lion’s share of the economy’s reversal in June. Output in the finance industries fell, as stock market performance flagged. Wholesaling activity also receded, as demand for computers continued to falter, and retailing was essentially flat.

The economy’s best showing in June came from communications service providers, which continued to enjoy steady growth.

Total factory output fell 1.0% in June, after a 0.7% increase in May, the result of deeper cuts to production by manufacturers of electronic products. Producers of paper and allied products and lumber also reduced output significantly, and automotive production fell back slightly. There was widespread weakness as 14 of 22 major industry groups, which accounted for 52.3% of total manufacturing production, declined in June. These decreases were partly offset by gains in aircraft, chemicals and plastics manufacturing.

Output of electronic products fell 5.8% in June; the pattern of steep declines, which was interrupted in May, resumed. Manufacturers of telecommunications equipment showed the largest decline (-14.3%), bringing levels down 50% since November 2000. Makers of computers and peripherals, which had been holding their own in recent months, saw their second sharpest drop in almost three years. Production of fibre optic equipment and electronic parts and components also fell substantially. Inventories of electrical and electronic products continued to accumulate in producers’ warehouses, indicating that further cuts to production may be in store. Relative to sales, these manufacturers’ finished product inventories were at their highest in a decade.