2
TRANSPORTATION AND
THE CANADIAN ECONOMY
The Canadian Economy in 1999
In 1999, Canada experienced vigorous economic growth. Real
Gross Domestic Product (GDP) rose four per cent, surpassing the
performance of 1998. The continuing strength of the US economy
generated demand for Canadian goods and services.
Figure 2-1 compares transportation's real GDP with that of
other sectors.
The strength of the economy was based on an 9.3 per cent increase
(in real terms) in investment spending. Spending on machinery
and equipment was particularly strong, increasing by 14.9 per
cent, compared with 9.5 per cent in 1998. Y2K-related computer
purchases were responsible for a large part of the increased investment
spending. Consumer spending remained firm, growing by 3.2 per
cent, up from 2.8 per cent growth the year before. Government
spending rose by one per cent, down slightly from 1.7 per cent
in 1998.
As shown in Table 2-1, production in the manufacturing sector
rose by 6.2 per cent in real terms in 1999, fuelled by investment
activity and consumption in Canada and the US. Both the motor
vehicle equipment industry and the office machinery (e.g. computers)
sectors experienced strong growth. Production in the primary goods
industries dropped, as mining activity fell by 2.8 per cent. However,
both agriculture and forestry activity increased. Construction
activity increased by 3.8 per cent in 1999, after a flat year
in 1998. Retail trade had a good year, with a 3.9 per cent increase.
Transportation activity rose 5.1 per cent, a pace faster than
the economy as a whole.
The US economy has been very strong in recent years and recorded
real growth of 4.1 per cent in 1999. Consequently, merchandise
export sales to the US were up 14.9 per cent in 1999 in current
dollars. Mexico, Canada's other NAFTA partner, also benefited
from the strong US economy, and its real GDP grew by 2.7 per cent
in 1999. Canada's other trading partners have not demonstrated
the same degree of strength. Western Europe had growth of 1.9
per cent and Canadian merchandise exports to that market rose
by only 1.8 per cent. While the 1998 Asian financial crisis has
been reversed, that region as a whole still recorded negative
or negligible growth in 1999. Japan, the world's second largest
economy, has not yet recovered completely from its recession,
and real output there fell by 1.4 per cent in 1999. Consequently,
Canada's merchandise exports to Japan fell by 3.2 per cent. South
America continued to feel the effects of the Asian crisis, and
real GDP fell 3.5 per cent in 1999 for the region. Figure 2-2
compares Canada's real GDP with that of other regions.
As shown in Figure 2-3, Canadian merchandise exports grew 11.7
per cent overall in 1999, totalling $360.6 billion. As the Canadian
economy improved, Canadians bought more goods from abroad. Imports
grew by 7.1 per cent to $325 billion, leaving a merchandise trade
surplus of $34 billion, compared with $18.9 billion in 1998. Canada's
trade surplus with the US rose to $55 billion.
Automotive product exports increased by 26.4 per cent in 1999
and accounted for close to 27 per cent of Canada's exports. Other
export sectors that showed large increases were energy (26.8 per
cent), forestry (11 per cent) and machinery and equipment (eight
per cent). In terms of imports, machinery and equipment accounted
for 33 per cent. Automotive product imports rose by 13.7 per cent.
The Canadian dollar has risen from its low of US $0.6831 in
August of 1998. As the Asian financial crisis diminished, commodity
prices rebounded and exports grew. Prices went up, in general,
by 1.7 per cent in 1999. Consumer transportation prices increased
by 3.3 per cent, reflecting increases in energy prices.
Incomes have started to rise in Canada, reflecting the strengthening
economy and the improved government fiscal position. As shown
in Figure 2-4, real disposable income per capita rose 1.3 per
cent in 1999. This is small by comparison with the increases in
recent years in the US, but is still a significant improvement
when compared with its relative stability during the past decade
in Canada.
The strengthening of the Canadian dollar and the improvement
in Canadians' income has resulted in increased international overnight
travel to both the US (up 5.1 per cent) and overseas (up 0.8 per
cent) in 1999. Domestic travel by Canadians also increased.
Figure 2-5 shows the amount of international overnight travel
to Canada between 1991 and 1999.
The number of foreign residents visiting Canada increased by
3.6 per cent in 1999, as the number of overnight visits to Canada
increased from both American and overseas visitors. A combination
of favourable exchange rates for the Canadian dollar and improved
US incomes has brought large numbers of US visitors to Canada.
As well, the improvement in the Asian region's economy has meant
a return of tourists from that region.
Overview of Provincial Economic Performance
Newfoundland's economy experienced strong growth, fuelled by
the offshore oil industry, the manufacturing sector, a rejuvenated
fishing industry and tourism. Strong tourism, manufacturing and
construction sectors were the driving forces behind Prince Edward
Island's economy, while Nova Scotia's has been driven by wholesale
sales, strong manufacturing activity and the development of the
Sable Offshore Energy Project. Investment and tourism fuelled
New Brunswick's growth. The Quebec economy outpaced the national
average, with investment spending and housing being the main drivers.
Indicators of economic activity all showed strong economic growth
in Ontario, while agricultural output and mining problems eliminated
any growth in Manitoba. Construction of the Alliance Pipeline
Project in Saskatchewan partially offset a poor performance in
the mining sector. High commodity prices energized Alberta's economy.
British Columbia pursued its recovery with exports driven by the
low Canadian dollar and rising commodity prices.
The Canadian Economy in 1999
- Appendix 2-1 Personal Expenditures
on Transportation, 1998
- Appendix 2-2 Transportation
Investment by Industry and Government, 1997
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