Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040831f.jpg" width="353"></p>
<p>The pause in GDP growth in many countries in the second quarter was not apparent in Canada. Real GDP in Canada rose 4.3% after a revised 3.0% in the first quarter. The consensus expectation was for a 5% rise, but that was before the upward revision of the first quarter from 2.4%. Canada&#39;s growth rate in the second quarter compares with 2.8% for the U. S. 1.67% for Japan and 2.06% for Euro Zone.</p>
<p>Increases in business capital spending and exports outweighed the declines in the rates of spending on personal and government consumption and an actual decline in government spending on plant and equipment. Business reduced inventories at an annual rate of C$3,544 million after having reduced them at an annual rate of C$44,672 million in the first quarter. The business reduction in inventories in the second quarter was offset by a C$1,325 annual rate of accumulation by the government sector.</p>
<p>The increase in activity has begun to put pressure on prices as can be seen in the widening gap between real and nominal GDP in the attached chart. The Deputy Governor of the Bank of Canada, David Longworth, has only last week commented on the Bank&#39;s commitment to raise rates to check inflation. The overnight funding rate, which is currently 2%, is the rate policy targets. It was last changed on April 13, 2004 when is was lowered by 25 basis points. The next meeting of the monetary authorities is on September 8, 2004.</p>
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<tr>
<th scope="col" class="firstcol"><b>Seasonally adjusted annual rates of change</b></th>
<th scope="col"><b>Q2 04 %</b></th>
<th scope="col"><b>&nbsp; Q1 04 %</b></th>
<th scope="col"><b>&nbsp;Q4 03 %</b></th>
<th scope="col"><b>Q3 03 %</b></th>
<th scope="col"><b>2003 %</b></th>
<th scope="col"><b>&nbsp; 2002 %</b></th>
<th scope="col"><b>&nbsp; 2001 %</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Domestic Product nominal</td>
<td>10.19</td>
<td>7.63</td>
<td>4.76</td>
<td>4.18</td>
<td>5.25</td>
<td>4.45</td>
<td>2.94</td>
</tr>
<tr>
<td class="firstcol">Gross Domestic Product real</td>
<td>4.29</td>
<td>&nbsp;3.01</td>
<td>2.20</td>
<td>1.36</td>
<td>2.02&nbsp;</td>
<td>3.44</td>
<td>1.80</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Personal consumption</td>
<td>1.30</td>
<td>&nbsp;6.44</td>
<td>0.67</td>
<td>4.37</td>
<td>3.13</td>
<td>3.39</td>
<td>2.68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government consumption</td>
<td>1.24</td>
<td>&nbsp;3.18</td>
<td>3.86</td>
<td>0.41</td>
<td>3.80</td>
<td>2.80</td>
<td>3.70</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business fixed investment</td>
<td>&nbsp; 4.71</td>
<td>&nbsp;7.42</td>
<td>5.22</td>
<td>14.87</td>
<td>4.61</td>
<td>1.41</td>
<td>3.33</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports of goods and services</td>
<td>21.57</td>
<td>&nbsp;6.09</td>
<td>9.44</td>
<td>-1.94</td>
<td>-2.39&nbsp;</td>
<td>1.12</td>
<td>-2.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports of goods and services</td>
<td>13.34</td>
<td>&nbsp;3.77</td>
<td>17.77</td>
<td>-3.02</td>
<td>3.81</td>
<td>1.45</td>
<td>-4.98</td>
</tr>
<tr>
<td class="firstcol"><b>Difference at annual rate</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business inventory change</td>
<td>-3,544</td>
<td>-44,672</td>
<td>35,000</td>
<td>-44,988</td>
<td>&nbsp;9,753</td>
<td>6,466</td>
<td>-17,696</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government inventory change</td>
<td>1,328</td>
<td>-336</td>
<td>-112</td>
<td>-64</td>
<td>54</td>
<td>-53</td>
<td>-10</td>
</tr>
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The pause in GDP growth in many countries in the second quarter was not apparent in Canada. Real GDP in Canada rose 4.3% after a revised 3.0% in the first quarter. The consensus expectation was for a 5% rise, but that was before the [...]

Second Quarter GDP Growth in Canada Accelerates

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Tom Moeller

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Consumer spending remains firm. Personal consumption expenditures (PCE) increased 0.8% (5.8% y/y) during March after rising an unrevised 0.8% in February. A 0.6% increase had been expected in the Action Economics Forecast Survey. Adjusted for price changes, PCE rose 0.5% last month (3.1% y/y), also steady with February.

Real spending on durable goods increased 0.9% in March (4.3% y/y) after rising 1.4% in February. Real spending on motor vehicles improved 0.8% (-2.9% y/y) after rising 2.8%. Real home furnishings & appliance outlays increased 0.8% (5.6% y/y) after rising 0.6% in February while real spending on recreational goods & vehicles jumped 1.2% (9.8% y/y) after edging 0.1% higher in February. Spending on other durable goods rose 0.7% (9.9% y/y) after a 2.2% jump.

Real spending on nondurable goods jumped 1.3% last month (3.0% y/y), after falling in each of the prior two months. Real clothing and footwear purchases were off 0.6% (+3.0% y/y) following a 0.8% decline. Real food & beverage buying surged 1.1% (2.4% y/y) after rising 0.2%. Real outlays on gasoline & other energy products rose 4.3% (-0.3% y/y) after falling sharply in three of the prior four months. Spending on other nondurable goods increased 1.2% (4.7% y/y) following a 0.3% rise.

Real spending on services increased 0.2% (2.8% y/y) in March following a 0.6% February gain. Real spending on housing & utilities held steady (0.6% y/y) after easing 0.1% in the prior month while real healthcare spending rose 0.6% (4.5% y/y) after a 0.5% rise. Real spending on food services & accommodations improved 0.3% (4.0% y/y) after gaining 0.6% in February while real spending on financial services & insurance rose 0.4% last month (3.5% y/y), about the same as in February. Real spending on transportation services fell 0.7% (+4.2% y/y) after rising 1.9% in February.

Personal income rose 0.5% (4.7% y/y) in March after increasing an unrevised 0.3% in February. A 0.5% increase had been expected. Wages & salaries rose 0.7% (5.9% y/y) for the second consecutive month. Rental income jumped 1.6% (8.4% y/y), about as it did in February and proprietors’ income rose 0.3% (4.3% y/y) after a 0.4% gain. Income from assets improved 0.1% (2.3% y/y) after a 2.0% decline and current transfer receipts rose 0.3% (3.1% y/y) after rising 0.6% in February. Government social benefits rose 0.3% (3.0% y/y) after strengthening in each of the prior two months.

Disposable personal income increased 0.5% (4.1% y/y) in March following a 0.2% February rise. After adjusting for price changes, disposable income improved 0.2% (1.4% y/y) last month after easing 0.1% in February and holding steady in January.

As spending growth again outpaced the gain in disposable income, the personal saving rate fell to 3.2% from an unrevised 3.6% in February. The rate was down from a May 2023 high of 5.3% and the lowest since October 2022. Personal saving declined 9.2% (-35.9% y/y) after falling 13.7% in February.

The PCE chain price index rose 0.3% (2.7% y/y) in March, the same as it did in February but down from 0.4% in January. These increases were up from minimal monthly change during the fourth quarter of last year. The price index excluding food and energy rose 0.3% (2.8% y/y), the same as it did in February, but these were below a 0.5% January rise. Goods prices rose 0.1% last month (0.1% y/y) following a 0.5% rise. Services prices rose 0.4% (4.0% y/y) following a 0.3% increase. Services prices excluding energy & healthcare increased 0.5% (4.4% y/y) after rising 0.3% in February. Food prices eased slightly (+1.5% y/y) last month after rising 0.1% in February. Energy goods & services prices rose 1.2% (2.6% y/y) following a 2.3% rise.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Spending growth holds at strongest rate since June.
- Disposable income increase picks up.
- Core PCE price index gain stabilizes at lessened rate.

U.S. Personal Spending Remains Firm; Core Price Rise Steadies in March

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Real GDP grew 1.6% (SAAR) in Q1’24 in this advance estimate, following a 3.4% gain in Q4’23 and a 4.9% Q3’23 rise. A 2.4% increase had been expected in the Action Economics Forecast Survey. Real GDP grew 3.0% on a Q1/Q1 basis after a 3.1% rise in 2023 and a 0.7% gain in 2022.

The growth slowdown last quarter stemmed from reduced contributions to growth from the change in business inventories and international trade. Inventories subtracted 0.35 percentage point from growth last quarter following a 0.47 point subtraction in Q. Net exports subtracted 0.86 percentage point after adding 0.25 percentage point in Q4. Exports grew 0.9% (0.3% y/y) which followed a 5.0% Q4 rise. Imports strengthened 7.2% (1.3% y/y) after rising 2.2% in Q4.

Growth in real final sales to domestic purchasers of 2.8% (2.9% y/y) followed two quarters of 3.5% gain. Personal consumption expenditures rose 2.5% (2.4% y/y) after a 3.3% increase in Q4, adding 1.7 percentage points to Q1 growth.

Durable goods spending declined 1.2% (+2.0% y/y) last quarter following a 3.2% gain. Motor vehicle expenditures fell 9.0% (-5.3% y/y) after declining 1.7%. Furniture & appliance buying rose 4.0% (2.8% y/y) after a 1.7% gain in Q4. Recreational goods & vehicle purchases fell 1.5% (+8.3% y/y) after strengthening 7.5% in Q4.

Nondurable goods outlays held steady (+1.9% y/y), following 2.9% growth in Q4. Apparel outlays rose 5.3% (1.8% y/y) after a 3.4% increase while food & beverage spending rose 1.0% (1.2% y/y) following a 0.8% gain. Outlays on gasoline & other energy products declined 10.9% (+0.1% y/y) after rising 4.3% in Q4.

Spending on services increased 4.0% last quarter (2.6% y/y) after a 3.4% gain. Housing & utilities outlays rose 1.4% (1.3% y/y) after a 0.1% Q4 improvement. Health care purchases rose 5.5% (4.6% y/y) following a 7.8% increase. Transportation services outlays growth of 4.6% (3.3% y/y) was improved from a 4.2% Q4 rise. Restaurant & hotel accommodations fell 2.0% (+2.6% y/y) after gaining 6.5% in Q4, while growth in recreation outlays jumped 4.8% (2.2% y/y) after a 0.4% rise in Q4.

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Business fixed investment increased 2.9% (3.9% y/y) last quarter, following a 3.8% Q4 rise, but spending on nonresidential structures eased 0.1% (+9.4% y/y) after surging 10.9% in Q4. Equipment investment increased 2.1% (1.0% y/y) after falling 1.1%. Information processing investment strengthened 12.2% (+2.2% y/y) following an 11.4% rise, while industrial equipment outlays grew 17.8% (1.4% y/y), after holding steady. Transportation equipment spending offset these gains and weakened 25.6% (-1.3% y/y) about as they did in Q4. Investment in intellectual property products rose 5.4% (3.6% y/y), after a 4.3% rise.

Residential structures investment surged 13.9% (5.1% y/y) in Q1, adding to two consecutive quarters of firm increase.

Government spending increased 1.2% (3.7% y/y), accounting for 0.21 percentage points of GDP growth, after a 4.6% rise. Federal government spending eased 0.2% (+2.5% y/y) following a 2.4% increase. State & local government spending grew 2.0% (4.4% y/y), after a 6.0% Q4 rise.

The GDP price index rose 3.1% (2.5% y/y) last quarter after a 1.6% Q4 gain. The rise was double expectations for a 1.6% Q1 increase. The PCE price index increased 3.4% (2.6% y/y) after a 1.8% rise. The PCE price index excluding food and energy prices rose 3.7% (2.9% y/y) after increasing 2.0% for two straight quarters. The PCE goods price index fell 0.5% (-0.2% y/y) after falling 1.4% and services prices rose 5.4% (4.0% y/y), after a 3.4% rise. The services price index less energy & housing rose 5.1% (3.5% y/y) after a 2.6% rise.

The business fixed investment price index rose 1.4% (1.1% y/y) following a 2.0% rise. The residential investment price index increased 0.6% (2.1% y/y) following two quarters of roughly 4.0% gain. The government spending price index rose 3.8% (2.4% y/y) after rising 1.9% in the fourth quarter.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Quarterly growth is slowest since mid-2022.
- Inventories & foreign trade subtract from growth.
- Domestic final demand gain moderates.
- Price index growth accelerates.

U.S. GDP Growth Weakens in Q1’24

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The Pending Home Sales Index from the National Association of Realtors increased 3.4% (0.1% y/y) to 78.2 after rising 1.6% to 75.6 in February. These gains followed a 4.7% January decline. Sales were 38.9% below the peak in August 2020. The index reflects sales contract signings.

The rise in March sales occurred as the average rate on a 30-year mortgage increased to an average 6.82% from 6.78% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales increased in three out of four regions. Sales in the South surged 7.0% (-1.5% y/y) following a 1.1% February decline. Sales in the West jumped 6.8% (3.6% y/y) after falling 6.5% in February. Sales in the Northeast rose 2.7% (-0.3% y/y) in March after declining 0.3%. Moving lower, sales in the Midwest fell 4.3% (+1.3% y/y) in March after a 10.6% February improvement.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Increase is fourth in five months.
- Sales rise in most regions of the country.

U.S. Pending Home Sales Strengthen in March

Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to $91.83 billion in March from $90.30 billion in February (revised from a $91.84 billion deficit initially reported on March 29), according to the U.S. Census Bureau. This was the third time in four months that the goods deficit had widened. The March deficit was the biggest since April 2023 and larger than a $81.91 billion shortfall in March 2023. A deficit of $91.0 billion for March had been expected by the Action Economics Forecast Survey. The deficit had reached a peak of $121.18 billion in March 2022. In Q1'24, the goods trade deficit widened to $272.70 billion, the largest since Q2'23, after rising to $264.19 billion in Q4'23. The goods trade deficit subtracted 0.68%-point to real GDP growth in Q1'24 after having added 0.31%-point in Q4'23.

Total exports fell 3.5% m/m (-2.1% y/y) in March, the first monthly fall since November, reversing a 2.9% gain in February. Exports had fallen 6.4% since a July 2022 high. The fall in exports in March reflected exports m/m drops of 9.4% (-1.9% y/y) in foods, feeds & beverages, 3.9% (-4.8% y/y) in industrial supplies & materials, 3.7% (+3.1% y/y) in capital goods excluding autos, and 1.8% (-5.1% y/y) in nonfood consumer goods excluding autos. Meanwhile, exports of automotive vehicles & parts were virtually unchanged (-2.2% y/y) in March after an 8.5% drop in February. To the upside, exports of other goods rose 2.4% (-4.1% y/y) in March following a 0.6% increase in February and two consecutive m/m declines.

Total imports decreased 1.7% m/m (+2.5% y/y) in March, the first monthly decline in four months, following a 1.8% increase in February. Imports had fallen 9.9% since a March 2022 high. The decrease in imports in March reflected imports m/m drops of 10.8% (+6.5% y/y) in automotive vehicles & parts, 3.6% (+5.1% y/y) in foods, feeds & beverages, 3.2% (-7.3% y/y) in industrial supplies & materials, 2.9% (-0.2% y/y) in other goods, and 0.4% (+6.9% y/y) in capital goods excluding autos. In contrast, imports of nonfood consumer goods excluding autos were the only end-use category with a monthly gain in March; they rose 4.7% (4.0% y/y), the third m/m rise in four months, on top of a 2.6% February rebound.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Largest goods trade deficit since April ’23 and larger than expected.
- Exports drop 3.5% following three straight m/m rises.
- Imports decline 1.7%, the first m/m decrease since November.

Second Quarter GDP Growth in Canada Accelerates

Summary

Louise Curley

More Economy in Brief

U.S. Personal Spending Remains Firm; Core Price Rise Steadies in March

U.S. GDP Growth Weakens in Q1’24

U.S. Pending Home Sales Strengthen in March

U.S. Goods Trade Deficit Widens to $91.83 Billion in March

Seasonally adjusted annual rates of change	Q2 04 %	Q1 04 %	Q4 03 %	Q3 03 %	2003 %	2002 %	2001 %
Gross Domestic Product nominal	10.19	7.63	4.76	4.18	5.25	4.45	2.94
Gross Domestic Product real	4.29	3.01	2.20	1.36	2.02	3.44	1.80
Personal consumption	1.30	6.44	0.67	4.37	3.13	3.39	2.68
Government consumption	1.24	3.18	3.86	0.41	3.80	2.80	3.70
Business fixed investment	4.71	7.42	5.22	14.87	4.61	1.41	3.33
Exports of goods and services	21.57	6.09	9.44	-1.94	-2.39	1.12	-2.83
Imports of goods and services	13.34	3.77	17.77	-3.02	3.81	1.45	-4.98
Difference at annual rate
Business inventory change	-3,544	-44,672	35,000	-44,988	9,753	6,466	-17,696
Government inventory change	1,328	-336	-112	-64	54	-53	-10