Economic News − Quebec: Real GDP down 0.3% in Q3
Mon, Dec 20 2010, 22:27 GMT
by Economic and Strategy Team
Quebec: Real GDP down 0.3% in Q3
Real GDP (q/q, annualized):
Q3: -0.3% Q2: +2.2% 2010Q1: +4.2%
FACTS: The Institut de la statistique du Québec (ISQ)
reported that Quebec real GDP retreated slightly at an annualized 0.3% in 2010Q3 (vs. +1.0% for Canada on the whole), after advancing 4.2% (revised upward from 3.2%)in Q1 and 2.2% (revised upward from 2.0%) in Q2. Yet,final domestic demand grew 4.3%, led by consumer spending (+5.7%), residential construction (+8.5%) and business investment in machinery and equipment (+8.2%). Inventory expansion added 1.8 percentage points to economic growth, which was nevertheless negative owing to substantial drag from external trade. Indeed, this component trimmed nearly 7 percentage points from GDP growth. More specifically, international merchandise exports fell at an annualized 18.4% while imports rose 2.2%. The pullback in production in Q3 was attributable essentially to services, particularly wholesale trade (- 15.3%) and educational services (-7.5%). As for goods production, a 2.2% drop in manufacturing output was offset by advances in the electricity sector (+9.5%), mining production (+11.6%) and residential construction
(+12.0%).
OPINION: The GDP decline in Q3 (top chart) was strictly due to slumping exports. In fact, weakness in exports has been characteristic of the past three quarters. It has derived above all from three segments, namely, aerospace products, metals and ores, and electricity (middle chart). The situation in the province contrasts sharply with the state of affairs in the rest of Canada, where exports grew in 2010 thanks to significant increases in automobile products and machinery and equipment. This said, the historical revision of the GDP has revealed a less severe recession and a more robust recovery in Quebec than initially reported, particularly during the first half of 2010 (bottom chart). Given the decrease in housing starts and factory sales so far in Q4, growth in the quarter is likely to be sluggish again in the end. The historical revision nevertheless warrants raising our economic growth forecast for 2010 from 2.6% to 2.9%. For 2011, however, we are maintaining our growth forecast at 2.2%. Summary
