Economic Analysis and Statistics  Canadian Industry Statistics

Gross Domestic Product (GDP)
Canadian Economy

This section reviews Gross Domestic Product (GDP) at basic prices by industry for the Canadian Economy from 1997 to 2003. Additional analysis is offered in the following sections: GDP for Goods-producing industries and GDP for Services-producing industries.

The following section does not define or examine recessionary periods for the Canadian economy or certain sectors, subsectors and industries. This type of analysis is possible through examining more precise quarterly and monthly trends. Monthly data are available from the Statistics Canada website (see Gross domestic product at basic prices by industry).

Current analyses of the Canadian economy using quarterly and monthly data are also available from Industry Canada's Micro-Economic Monitor and Monthly Economic Indicators.

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The sectors of the economy can be regrouped to form five largely goods-producing industries (NAICS 11 to 31-33) and fifteen service-producing industries (NAICS 41 to 91).

The 20 economic sectors specified by the North American Industry Classification System (NAICS) are listed below. Links are to the official NAICS Canada 2002 definition of each sector.

• Goods-producing Industries
  • Agriculture, Forestry, Fishing and Hunting (NAICS 11)
  • Mining and Oil and Gas Extraction (NAICS 21)
  • Utilities (NAICS 22)
  • Construction (NAICS 23)
  • Manufacturing (NAICS 31-33)
• Services-producing Industries
  • Wholesale Trade (NAICS 41)
  • Retail Trade (NAICS 44-45)
  • Transportation and Warehousing (NAICS 48-49)
  • Information and Cultural Industries (NAICS 51)
  • Finance and Insurance (NAICS 52)
  • Real Estate and Rental and Leasing (NAICS 53)
  • Professional, Scientific and Technical Services (NAICS 54)
  • Management of Companies and Enterprises (NAICS 55)
  • Administrative and Support, Waste Management and Remediation Services (NAICS 56)
  • Educational Services (NAICS 61)
  • Health Care and Social Assistance (NAICS 62)
  • Arts, Entertainment and Recreation (NAICS 71)
  • Accommodation and Food Services (NAICS 72)
  • Other Services - except Public Administration (NAICS 81)
  • Public Administration (NAICS 91)
    

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The GDP data here is maintained by Statistics Canada's Canadian System of National Accounts (CSNA).

The data is obtained using the CANSIM service. The main series used in this section are CANSIM Table 379-0017 and CANSIM Table 379-0020.

It is GDP by industry presented in chained 1997 dollars. The process of chaining takes into account fluctuations in price which will occur overtime. In addition, chaining preserves the original growth rates within sectors and industries of the economy.

Statistics Canada expresses GDP in basic prices, which is measured as output valued at basic prices (subsidized prices less taxes on the products at the time of sale and separately invoice transport charges) less intermediate consumption valued at purchasers prices.

The reader should be aware that there are other ways of expressing Gross Domestic Product than presented here (e.g. expenditure-based and income-based rather than by industry, at factor cost and market prices rather than at basic prices and in constant dollars as opposed to chained dollars). As a result, caution is recommended when comparing the data presented herein with other published sources.

Gross Domestic Product (GDP) by industry measures the value of output of an industry less the value of intermediate inputs required in the production process. In this sense, it is an output-based measure of economic activity and is commonly referred to as the value-added of an industry.

GDP is gross in the sense that it does not deduct the depreciation of capital, and domestic as it measures production occurring within the political boundaries of Canada. At the industry level, GDP represents the value each industry adds to the production process. At the aggregate level, it represents the total value of (traditional) production in the economy.

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The value-added concept is used to avoid double counting. For instance, GDP in the Retail Bakeries industry would not include the value of the flour used to make a loaf of bread, it would only include the value the Retail Bakeries industry adds by turning the flour into bread (for example, the mixing, leavening and baking process).

This example of value-added (GDP) can be broadened to illustrate the total value of a loaf of bread. Let us suppose, we live in a simple world, where the only two inputs needed to make bread are flour and water. And for the moment, let us assume water is free.

So as before, it is the baker who turns the flour into bread. This process is his value-added (GDP). For the baker, flour is an input into the production of bread, thus the value of the flour is not included in the value-added (GDP) of the baker.

The baker buys his flour from the miller, who produces flour by grinding wheat. So the value-added (GDP) of manufacturing flour is captured by the miller. Since the miller purchases wheat as an input, the value of wheat is not included in the value-added (GDP) of the miller.

Who does the miller buy his wheat from? From the farmer, who harvests the wheat from his land using his blood, sweat and tears. Then, the value-added (GDP) of wheat, which is ground to produce flour by the miller to make a loaf of bread by the baker, is captured by the farmer.

Since our baker owns a retail bakery, and sells his wares directly to market, the total value of the bread would equal the value-added of the farmer plus the value-added of the miller plus the value-added of the baker.

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Economic growth is often measured as the percentage increase in GDP, adjusted for inflation, from one year over an earlier year. Trend growth rates for an economy, sector or industry are calculated over a series of years. In Canadian Industry Statistics, we often use the compound annual growth rate (CAGR) to depict trends in real GDP growth and other economic indicators.

GDP growth is an important economic indicator. It measures progress or the rate of expansion of the economy's capacity to produce output (goods and services). It is examined as a measure of the short term stability or instability of the economy. GDP growth is also reflective of the future consumption possibilities for a nation and is the main source of improvements to our standard of living over time.

Economic growth occurs from accumulating human capital (knowledge and skills), investing in physical capital (factories, machinery and equipment) and the implementation of new technologies in the production process.

With benefits to economic growth come costs. One cost to economic growth is that in order to increase the consumption possibilities for tomorrow, we have to forego some consumption today. To maintain economic growth more effort has to be placed on the production of technology and capital in order to produce goods for future consumption, rather than the production of goods for current consumption.

Other costs may occur from sustaining a high rate of economic growth, such as resource and environmental degradation. However, the impact faster economic growth has on our environment and resources are not reflected in the measure GDP growth.

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GDP for the Canadian economy is depicted in the graph below.

Gross Domestic Product (GDP) by Industry
Canadian Economy
1997-2003

Between 1997 and 2003, GDP for the Canadian Economy increased from $816.8 billion to $1,012.7 billion. Overall, GDP growth was positive for the Canadian economy. The compound annual growth rate of GDP between 1997 and 2003 measured 3.6%.

GDP growth between 1997 and 2000 was well above the average rate. However, in 2001, annual GDP growth in Canada slowed to 1.8% corresponding with a down turn in the United States economy.

In 2002, GDP picked-up resulting in an annual growth rate of 3.4 %. The trend of higher growth did not continue, as in 2003 annual GDP growth for the Canadian economy fell back to 1.9%.

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The sectors of the economy used here are those defined by the North American Industry Classification System (NAICS) - Canada 2002.

The table below shows GDP and trends in GDP growth for each sector of the Canadian economy. Data for the Finance and Insurance and Real Estate and Rental and Leasing (FIRE) and the Management of Companies and Enterprises sectors are combined and refered to as FIRE and Company Management.

GDP for Goods-producing industries accounts for roughly one-third of total value-added in the Canadian economy. Between 1997 and 2003, GDP growth for these industries averaged 3.0% per year, which was slightly lower than the average annual GDP growth of 3.6% recorded for the Canadian economy as a whole.

Over the most recent year, 2003, growth in GDP for the Canadian economy subsided - falling to 1.9 %. For the Manufacturing sector growth was measured at -0.5%. Declining value-added appeared in many of its industry groups : food, beverage and tobacco producers; textiles, clothing, and leather manufacturers; fabricated metals, machinery, electrical equipment, and transportation equipment; and furniture manufacturers.

Other goods-producing sectors, such as the Agriculture, Forestry, Fishing and Hunting sector, which was subject to negative volatility in recent years due to the impact of drought and insect infestations on crop production, had an excellent harvest and recorded stellar growth at 10.3 % in 2003. The Mining and Oil and Gas Extraction sector recorded 3.0 % in annual GDP growth, here higher mineral prices influenced the extraction of oil, gas and many non-metallic minerals.

The Construction sector experienced growth at 4.5 % in 2003. The continuation of lower interest rates promoted all types of construction activities. On the other hand, the Utilities sector experienced a decline in output of -2.4 %, as value-added for the electrical power generation, transmission and distribution industries fell in 2003.

Service-producing industries account for the other two-thirds of GDP. Between 1997 and 2003, GDP growth for the sectors which produce services averaged 4.0 % per year. For some service producing sectors, GDP growth rates were higher than the average in 2003. However, for many service industries growth subsided, a departure from their outstanding performance recorded in recent years.

The Transportation and Warehousing sector - a goods-related service sector - felt the impact of poor growth occurring in the manufacturing sector, here annual GDP growth declined slightly in 2003. SARS, occurring in early 2003, may have impacted consumer travel and transportation services as well as the Accommodation and Food Services sector. For accommodation and food services annual GDP growth fell -2.6 % in 2003.

More detailed analysis of GDP for goods-producing industries and services-producing industries are available in the corresponding web pages.