Canada Economy in February
In February, Canada’s economy continued to grow as the country’s imports increased by 0.9%. This increase was led by energy products, which accounted for the bulk of the increase. In addition, Canada registered its first merchandise trade surplus since May, and the country’s monthly merchandise trade value was over $100 billion for the first time since August 2017.
Food prices rose 6.7% on a year-over-year basis
Canadians had to pay more for basic food staples, including meat, fresh vegetables and fruits. This spike in prices impacted their household budgets, as well as their costs for transportation, housing and other household operations. According to the Consumer Price Index (CPI), prices of food increased 6.7% year over year in March. However, these increases came at a slower rate than the previous month, and they were the third highest increase since March 1981.
The Consumer Price Index (CPI) rose 0.6 percent in April, which was below the 1.0 percent rise in March. Food prices climbed more than the other categories, including energy. Shelter prices rose 7.4 percent compared to April 2021 and 6.8% in March. However, the largest downward contributor to 12-month inflation was the reduction in the cost of mortgage interest. Overall, the Canadian economy experienced a 0.7-percent increase in prices, and core CPI without food and energy rose 0.6 percent.
Despite the slowdown in the economy, the overall rate of inflation remained relatively high, as consumers continued to pay more for most goods and services. The consumer price index increased 6.9% year-over-year in September, down from 7.6% in July. However, the gap between prices and wages widened.
Dairy prices rose sharply in February
Dairy prices rose sharply in February, with the Dairy Price Index registering a 6.4% increase from the previous month. It was the sixth consecutive month of rises. It was also 24.8% higher than its value at the same time last year. In February, the index rose due to continued tightening of global markets.
As a result, dairy processors responded with price increases. One such company, Lactalis Canada Inc., which owns brands like Beatrice milk, Astro yogurt and Black Diamond cheese, raised prices by nearly 15 per cent. The increase was designed to offset the increased cost of feed and fuel for dairy producers.
While the FAO Food Price Index tracks changes in prices of food and energy, the rises in February were larger than in the previous months. Food and energy prices rose by 7.9% and 14.1%, respectively. In February, milk, cheese, butter and eggs prices jumped by over seven percent. Prices of fresh and frozen beef, ham, and bacon also increased by nearly 15%. Higher grain costs also increased the price of pasta by 17.8%. Breakfast cereals also increased by about 12 per cent.
Imports advanced 0.9%
Canada’s economy continued to expand in the first quarter of 2022, expanding at an annualized rate of 3.1%. The manufacturing sector contributed the most to this growth, up by 0.9%. In March, manufacturing output was up for the sixth straight month, surpassing pre-pandemic levels for the first time. Output rose in six of the 11 major manufacturing subsectors.
Canadians increased their spending on services, while spending on goods dropped. The increase was broad-based, as consumers increased their spending overseas, while reducing their expenditures on food services. As a result, the merchandise trade surplus widened for a fourth consecutive month. Canada has now had a merchandise trade surplus since June 2021.
Although goods exports remain below pre-COVID levels, service exports continued to rise. Canada’s terms of trade improved in the second half of the year, but still remain at 12% below their pre-pandemic baseline. Import volumes increased by 3.4% in the fourth quarter, led by increases in motor vehicle and parts, metal ores, and communications equipment.
Exports advanced 0.9%
The third quarter of 2014 saw export volumes increase by 1.9%, the largest advance in four months. The increase was broad-based, with gains led by higher shipments of crude oil and bitumen. Exports of metal ores and building and packaging materials also grew. However, automotive exports fell for the fourth straight quarter as the impact of the influenza pandemic affected supply chains. Despite these gains, total export volumes were still almost nine percent below pre-pandemic levels.
While Canada continues to benefit from a low base of economic growth, the economy is still facing a host of risks. A recent pandemic, coupled with tight labor market conditions, has impacted the economy. However, recent trade data indicate that this problem may be easing, allowing the economy to continue growing at a healthy pace.
Despite the recent economic challenges, exports rose in the second quarter. The increase was supported by gains in construction and wholesale trade. Import volumes, meanwhile, rose by 6.9%. However, higher borrowing costs continued to hurt the housing market.
Employment declines in three industries most affected by COVID restrictions
Employment declines in three industries most affected by the COVID restrictions increased by nearly half in March and April. The largest declines were in the health and social assistance industry (-718,000 jobs) and the leisure and hospitality sector (-373,000 jobs). The most affected industries are those with large share of women workers.
The arts, entertainment, and recreation industry saw job losses of about 1.3 million jobs during the first four months of the year. This includes businesses that make, distribute, and interpret sound recordings. It also includes motion pictures and videos. The two industries were mostly shut down during the early months of the COVID pandemic.
Employment declines in these industries are more pronounced in the construction industry. While construction employment is expected to recover in 2020, COVID restrictions have triggered closures of worksites nationwide. Almost every component of construction industry has been affected by COVID-19 efforts, but specialty trade contractors and establishments engaged in plumbing, electrical, and concrete pouring suffered the most.
Factory output edged up in February
Factory output in Japan edged up in February, the first increase in three months. The index rose from 95.8 in January to 95.7 in February, according to the Institute for Supply Management. The increase was largely offset by lower production of automobiles and parts, as well as in primary metals. The rise in manufacturing output reflected the return to operation of many plants that were offline due to the recent severe weather.
Overall industrial production grew 0.6 percent in February, after declining 0.5 percent in January. Factory output edged up 0.1 percent, while the index for mining and utilities fell. The gains in manufacturing were offset by a drop in auto production, which accounted for the largest share of the decline. The overall industrial production index now stands at 103.6 percent of its average for the past year.
Industrial production increased 0.1 percent in March after falling 0.9 percent in February. The decrease in February was mostly offset by a decrease in motor vehicle and parts production, but other manufacturing sectors posted modest gains. The output index for mining and utilities increased by 1.7 percent in March. Total industrial production rose 2.5 percent in the first quarter.
Oil and gas extraction rose sharply in February
The Canadian dollar rose sharply against the U.S. dollar in February, and oil and gas extraction is expected to continue to weigh on the currency. While the dip in resources was less pronounced than expected, oil sands extraction was down by 4.1 percent. This was in part due to Alberta’s forced production cuts, which aimed to reduce storage and boost prices.
Crude oil exports grew 3.4% to 17.0 million cubic metres in February, and the country’s crude oil output rose 5.2% to 1.1 million terajoules. The increase in primary energy exports is partly due to increased production in the Canadian Oil Sands. The increase in production was offset by a decline in production of synthetic crude oil, as not all upgraders were operating at full capacity.
Natural gas production in Canada rose 9.2% year over year in February. While production declined slightly in the residential sector, production increased in the industrial sector (+3.9%).