Fourth straight monthly gain in GDP posted in January

Gross domestic product advanced 0.6% in January, Statistics Canada reports. This marks the fourth consecutive monthly gain and the strongest monthly increase since early in 2000.

Consumers continue to provide the impetus for the economic turnaround as economic activity led by business remains slow. Manufacturers are also still trying to work off their inventories, which is reflected in the low GDP numbers posted by transportation and warehousing. This sector grew by just 0.1% in January and compared to January 2001 is down 6.1%.

"Consumers’ recent insatiable demand for housing and cars led to higher output in many industrial sectors. Increased demand for new cars and trucks propelled both the retailing and the wholesaling industries," Statistics Canada explains in its Daily Bulletin. It adds that brisk housing demand has also bolstered bew housing construction, which, in turn, has led to higher output in the manufacturing industries that feed construction.

The manufacturing sector, which had been in decline since September 2000, jumped 1.5% in January, the first significant advance in more than 16 months. The largest gains in manufacturing were concentrated in the production of wood, chemical, plastic, rubber and paper products. Increased drilling and rigging activity and expanding oil production helped the mining sector expand output for the first time since September.

In the retail sector activity was up 1.1% in January. This is the fourth consecutive month in which the retailing industry posted substantial gains; it is now up 7.8% compared with September. Most retailers saw some increase in demand in January; however, department stores and motor vehicle dealers were responsible for the bulk of the growth.

In January, sales by new motor vehicle dealers grew a further 1.3%. Sales since September climbed 16.8%, although imports advanced just 4.1%. Imports of motor vehicles account for about 80% of the supply of new motor vehicle sales.

"This imbalance caused shrinking inventories for new motor vehicle dealers; it holds much promise for future North American motor vehicle production to replenish new car dealers’ stocks," Statistics Canada comments.

However, manufacturers are still trying to get their inventories in order. Motor vehicle production fell 1.0% in January, after a 2.1% decline in December as manufacturers continued to gear back production to reduce inventories. Motor vehicle sales in the United States – the destination for about 90% of Canada’s auto production – have been declining in recent months. Motor vehicle parts production gained 1.5% in January, following three months of temperate growth. Motor vehicle parts exports also advanced in January.