Release Explanation: This report measures the monetary value of all goods and services produced within a Country’s borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy’s overall health. It includes all Company and Personal consumption, government outlays, investments, and exports fewer imports, that occur within a defined territory.
A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time:
Trade Desk Thoughts: Real gross domestic product declined 0.7% in January following decreases of 1.0% in December 2008 and 0.7% in November 2008, Statistics Canada said today. Economists had expected to see a decline of 0.6%.
Declines in the manufacturing of autos and related parts, as well as in wholesale trade and construction, made the biggest contributions to the decline. The finance and insurance sector, transportation, mining (excluding oil and gas extraction), and accommodation and food services also retreated.
Economic activity increased in retail trade, oil and gas extraction and the public sector.
Canadian banks, unlike their American counterparts, have for the most part side-stepped the worst excesses of the credit bubble and are generally in far better shape as a result. Canadian Prime Minister Stephen Harper told the Financial Times that the country’s banks should capitalize on the strength of their balance sheets by buying assets in the U.S. and other countries.
The Canadian dollar, also known as the loonie, is closely tied to the price of crude oil. It gained for the first day in three today as crude advanced in overnight trading and is headed for a gain of 1.9% this month, just the second monthly advance since last May. It has declined about 2.7% in the first three months of 2009.
Activity in the manufacturing sector (-3.1%) decreased for a sixth consecutive month in January, with 18 of the 21 manufacturing groups losing ground. Export-oriented sub-sectors were particularly hit as the volume of merchandise exports decreased 7.0% in January, due to the global slowdown of economic activity.
Motor vehicle manufacturers sharply curtailed their output in January in reaction to lower demand in the United States, bringing the level of production to about 40% of the peak recorded in the first quarter of 2007. Manufacturing industries related to construction activities continued to be affected by the decline in that sector in both Canada and the US. Computer and electronic product manufacturing also dropped.
The volume of wholesaling activity (-3.4%) continued to fall in January. The main declines were in the wholesaling of automotive products, building materials, and machinery and electronic equipment. The wholesaling of food products and of other products (including agricultural, chemical, recycled material and paper products) increased.
Construction activity was down 3.0% in January. Residential and non-residential building construction as well as engineering and repair work decreased. There was a sharp decline in residential building construction (-6.4%), particularly in the construction of new dwellings. Commercial and industrial building construction also contracted, while that of institutional buildings edged up.
The finance and insurance sector retreated 0.7% in January in light of the reduced level of activity in banking services, stock brokerages and mutual fund sales. In particular, banking activities related to residential mortgages and short-term business loans declined.
Value added in retail trade increased 1.4% in January, following three consecutive monthly declines. The volume of activities at new car dealers rebounded in January from its December decline, but remained below the level posted in the fourth quarter of 2008.
The energy sector's output was essentially unchanged in January. An increase in oil and gas extraction, particularly of natural gas, and in the transportation of natural gas, eclipsed the decline in electricity generation and the significant contraction in support activities for mining and oil and gas extraction.
Forex Technical Reaction: The cad (USD/CAD) has declined overnight after Monday's sharp decline. Crude oil has increased by $1.44 (3.08%) in overnight trading.