Purchases of clothing & footwear remain strong

01 Sep '08

3 min read

Real gross domestic product (GDP) edged up 0.1% in the second quarter of 2008, following a 0.2% decline (revised from -0.1%) in the first quarter. Real GDP advanced 0.1% in June. While final domestic demand continued to outpace GDP, growing 0.5% in the quarter, foreign demand for Canadian goods and services registered its fourth consecutive quarterly decline.

Production in the service industries was up 0.6% during the second quarter, led by gains in the public sector, retail trade. continued contractions in manufacturing activities, albeit at a much reduced pace compared to previous quarters, were behind the 1.0% decline in the goods-producing sector.

Consumer and government spending on goods and services advanced. Businesses increased their inventories and reduced their expenditures on fixed capital. The international trade surplus, measured in nominal values, increased as exporters benefited from higher commodity prices. Nonetheless, the volume of exports declined in the quarter.

Export volume continues to fall:
The volume of exports of goods and services fell 1.5% in the second quarter, the fourth consecutive decline, leaving their level 4.7% lower than in the second quarter of 2007. The decline in the second quarter of 2008 was widespread, as international sales of machinery and equipment continued to fall reflecting, in part, declining US expenditures on these goods.

The volume of imports of goods and services advanced 0.6%, after falling 2.3% in the first quarter. After a downturn in the first quarter, machinery and equipment imports grew, continuing the upward trend that began in 2003. The volume of international purchases of energy products jumped, mostly due to increased imports of crude petroleum. Energy imports have posted an average quarterly growth of 9.8% in the first half of 2008.

Personal spending moderates:
Personal spending grew 0.6% in the second quarter, continuing to moderate after gains of 1.8% and 0.8% in the previous two quarters. The slowdown reflects the drop in spending on durable goods. Notably, purchases of motor vehicles declined after substantial increases in the previous two quarters.

Conversely, purchases of clothing and footwear remained strong. Personal expenditure on furniture, furnishings and household equipment posted a sixth consecutive quarterly increase of over 1%.

Corporate profits strengthen:
Corporations recorded a significant profit increase in the second quarter (+8.3%), spurred by price increases, particularly for crude petroleum. This was the strongest gain in profits since the first quarter of 2004. While non-financial corporation profits jumped 10%, financial corporations registered a marginal gain.

Personal income advances:
Labour income advanced 1.1%, as growth in services-producing industries remained strong. Employment was up 0.3% while average hours worked declined.

Personal income growth slowed to 0.6%, from 2.0% in the previous quarter, when large one-time government transfers boosted income. Personal disposable income increased 1.1%. Personal outlays outpaced income growth and the saving rate slipped to 2.8%.

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