Canada’s Industrial Production Reaches All-Time High In February

Canada’s economy is growing rather slowly but nevertheless, some sectors are close to full capacity. In February, for example, Canadian industrial production soared to an all-time high.

Indeed, monthly GDP rebounded strongly in February following a miserable performance in January, so some economic bounce back was to be expected.

It is interesting to note, however, that the latest economic growth rebound was strongly concentrated in the goods sector.

Moreover, as a recent National Bank report indicates (May 1), the industrial rebound was not due to manufacturing or mining, but rather to a surge in the utilities sector. The breadth of the economic rebound was encouraging, particularly since there were gains in agriculture, mining, oil and gas, retail, arts/recreation, professional services and information.

The weakness in real estate production persisted, although this was not surprising given sinking home sales during the month. However, with home sales reportedly rising in March, one can expect the real estate sector of the economy to also bounce back.

As the second chart below indicates, the goods sector rebound in February extends Canada’s decade-long outperformance of the U.S. with regards to industrial production growth.

The Goods Producing Industries Outperform

Over the past twelve months, Canada the goods industries have far outperformed the overall economy. Of course, this uneven pattern of growth is relatively common when the economy is recovering from a slow growth phase.

Compared to the economy’s 3% GDP growth over the twelve months, Canadian manufacturing output expanded 4.9%, construction expanded 5.9%, and mining, oil and gas production grew by 4.3%.

Despite the strong economic growth rebound in February, Canada’s overall GDP growth is expected to be very soft in the first quarter.

Indeed, as a recent BMO report indicates (May 1), international trade in the first quarter will likely subtract from total economic growth for a fifth consecutive quarter.

As a result, the Canadian economy is expected to expand at a relatively slow 1.5% annual rate in Q1.  

The Canadian Economy Rebounded Sharply In February