Week of May 4, 2015

FEATURED ARTICLE: #36 Marks the End MARKET STATISTICS: Weekly Change

ECONOMIC STATISTICS:

Canadian Real GDP at Basic Prices – February Canadian real GDP managed to hold steady in February, following a revised 0.2% drop in January. Overall, this release is a touch better than expected.

Details of the release were mixed, to say the least. On the downside, the manufacturing took another one on the chops, falling 0.8% after a 0.7% drop in January, largely due to a deep decline in auto assemblies early in the year. Production levels point to no change in March. Still, the sector as a whole remains up 2.3% y/y, a bit better than the overall economy (2.1% y/y). Transportation (-1.0%) and wholesale trade (-0.8%) fell in sympathy with manufacturing. On the flip side, the big contributors to growth last month were utilities (+2.3% on the cold) and retail (+1.5% on a bounce). Neither gain is sustainable, and it is suspected that overall GDP will again be close to flat next month as well.

The winter months were no treat for Canada’s economy, but it now looks like GDP managed to hold roughly steady through a rough patch for oil & gas and the auto sectors – arguably the two most important industries in the country.

Canadian Provincial GDP – 2014 The economy expanded a solid 2.4%, but there were some wide discrepancies in growth across the country.

Alberta led with 4.4% real GDP growth, impressively marking five straight years above the 4% mark. Oil & gas extraction and related support activities surged 7.1% and 17%. Canada’s other oil-heavy provinces performed less spectacularly in 2014, with Saskatchewan’s economy expanding 1.4% (crop production fell sharply after a bumpy year in 2013), while Newfoundland & Labrador was output fall 2.9% as oil and mining output were both lower. Growth in Manitoba also slowed to 1.1% as crop production normalized in 2014.

British Columbia posted a strong year, with real GDP growth expanding 2.6%. Strength was broad-based, with gas and metal production rising, residential construction firm and manufacturing accelerating after zero growth in the prior year. Central Canada was mixed, with growth in word Ontario picking up to a solid 2.3% clip, the best pace since 2011, on the back of manufacturing. Quebec, however, disappointed at 1.4% as construction output fell for a second straight year. Finally, Atlantic Canada lagged the pack by a wide margin. New Brunswick’s economy was flat in 2014 and has gone nowhere over the past six years. Nova Scotia was the region’s best performer, as expected, with 1.6%.

Relative growth rankings across the provinces were almost bang on with market consensus, but the overall disparity was wider.

On September 2, 2014, I made a commitment to publish the Weekly Economic Report to the Investment Team. The Weekly Economic Report was a new initiative started this year, and has been rather successful in its first year of service. It has been quite a journey to build the report into its current form.

The report originally started out as a 1-page report, and highlighted the economic statistics of Canada as well as the economic releases of Canada and the United States [Figure 1]. It evolved into a lengthier, 3-page report, on November 10, 2014 [Figure 2], and included additions such as: the economic statistics for the United States, the market statistics, and more economic releases. On January 12, 2015, the report started to include a “Featured Article” section [Figure 3], which brings to light intriguing news about the market and/ or economy over the past week. February 16, 2015, marked the evolution of the report, to the format as it exists today. The report experienced a minor facelift on March 2, 2015 [Figure 4].

Figure 1.

Figure 2.

Figure 3.

Figure 4.

Since September 2, 2014, the Weekly Economic Report has been published for 35 consecutive weeks. This edition marks the 36th report, and the final report of the 2014-2015 school year. It has been an honour to serve as the Chief Economist, and I wish next year’s Executive Team equal if not more success.