Current economic conditions

August 11, 2005, Statistics Canada – According to the August assessment of current economic conditions in the latest edition of Canadian Economic Observer, mining led economic growth in the spring, and the boom in commodities sent investment in non-residential construction soaring in Western Canada. Household spending took a breather in May, although housing and autos sales turned up again in June. First-quarter growth was driven by consumer spending and business investment.

Investment in non-residential building rose 2.6% in the second quarter, thanks to record spending in Alberta and British Columbia (up 13% and 19% respectively). The spate of new industrial, office and shopping centre projects was reflected in a double-digit job gain in business services in these provinces. The business services industry includes areas such as architectural and legal services, which are required as firms draw up plans for expansion. Conversely, investment slumped in Central Canada due to cuts in industrial building.

Elsewhere, Western Canada held its lead over the rest of the country. While retail sales in May tumbled in the rest of Canada, they gained nearly another percentage point in the Prairies and remained essentially unchanged in British Columbia.

Although floods in Alberta helped drive housing starts down from their high for the year in May, the number of existing houses sold broke another record. British Columbia and the Prairies accounted for around 40% of sales of existing units at the national level in the first half of the year. Non-residential building permits have nearly doubled from last year.

Alberta held onto the gain in shipments made in April, and it has been responsible for much of the national growth since the turn of the year. It also continued to reap most of the revenues from Canadian export growth. In the second quarter, it reinforced its first-quarter gains with further advances in energy, capital goods and processed meat.

In British Columbia, shipments were bolstered by domestic demand after a two-month decline. The upswing was led by building materials and machinery, with exports trailing due to weakness in forest products.

The downturn in pulp shipments to China continued. Over the last few years, China has imported almost as much waste paper and cardboard (mostly from the United States) as pulp, which has hurt Canadian pulp exports. China has invested heavily in new paper recycling technologies.

In contrast to Western Canada, shipments resumed their downward trend in the central part of the country. They were off 0.7% in Ontario, and have dropped 5% since January.

This reflects the weakness in Ontario’s exports, the only region to have posted a decrease so far this year compared with last year. The slump is confined to the paper and automotive sectors, but they represent about 40% of the province’s total exports.

Domestic demand in Ontario was split between a sharp decrease in retail sales and buoyant investment. Housing starts jumped to their highest level since February 2003, a mark surpassed only once before in the early 1970s. Growth in non-residential building permits remained below the national average, although they are up so far this year compared with 2004.

The economy slowed in Quebec. Shipments were down, largely because of the volatile aircraft industry. Exports continued their upward climb. However, domestic demand fell sharply. Retail sales slumped (-1.3%) as employment edged down since January (the Atlantic provinces are the only other region where employment has declined). And non-residential building permits fell about 10% this year with the completion of a number of major projects started over the past two years.

About Statistics Canada

Statistics Canada produces statistics that help Canadians better understand their country�its population, resources, economy, society and culture. In Canada, providing statistics is a federal responsibility. As Canada�s central statistical agency, Statistics Canada is legislated to serve this function for the whole of Canada and each of the provinces.