Today's Report (10/29/2021)

Real gross domestic product (GDP) rose 0.4% in August, led by increases in accommodation and food services, retail trade and transportation. The continued easing of public health restrictions and further reopening across the country increased demand across many close contact service industries.

Overall, 15 of 20 industrial sectors were up as growth in services-producing industries (+0.6%) more than offset a decline in goods-producing industries (-0.1%).

Preliminary information indicates that real GDP was essentially unchanged in September. Widespread increases led by mining, quarrying, and oil and gas extraction, wholesale trade, and transportation were offset by a significant drop in manufacturing due to lower sales in transportation equipment and a decline in retail trade.

The accommodation and food services sector rose 7.0% in August, continuing to recover some of the ground lost since the beginning of the pandemic. Food services and drinking places rose 5.4% in August, following an 8.1% increase in July. The accommodation services subsector rose 11.3% as traveler accommodation and recreational vehicle parks and recreational camps and rooming and boarding houses both recorded strong gains. Arts, entertainment, and recreation rose 6.4% as all forms of activities were up, led by amusement, gambling, and recreation industries (+7.0%). For the third month in a row, the transportation and warehousing sector was up, growing 1.2% in August as all but one subsector increased.

What Is It?

The Gross Domestic Product released by Statistics Canada is a measure of the total value of all goods and services produced by Canada. The GDP is considered a broad measure of Canadian economic activity and health.

What Are The Fundamental Effects?

A higher real GDP improves the standard of living for Canadians, however, a GDP growth due to inflation erodes living standards because people pay more for the same.

How Does It Affect The Markets?

CURRENCY - Robust economic activity can firm up interest rates, which increases the demand for the Canadian Dollar. If inflation accelerates and stays high, it can lower the Canadian competitiveness in the world and worsen trade.

STOCKS - A healthy economy generates more business earnings, while a sluggish business environment depresses sales and income. However, higher prices will erode household purchasing power and may force interest rates to go higher.

BONDS - If the economy is growing at or below the pace projected by economists, the bond market is likely to react positively. If GDP figures exceed expectations, and inflation pressures are rising, interest rates may be raised, meaning bond prices will lower, and yields will rise.