National accounts

Canada’s collective national accounts—what we produce, earn, spend, trade, save, invest and borrow—have painted a picture of sound overall economic health in recent years. Despite the Severe Acute Respiratory Syndrome (SARS) and Bovine Spongiform Encephalopathy (BSE) crises, the ongoing instability abroad, surging oil prices and economic adjustment triggered by a rapid rise in the loonie against the U.S. dollar, Canada has experienced strong and steady growth.

Though economic growth has slowed since the boom of the late 1990s, Canada saw its 13th consecutive year of growth in 2004, with a gross domestic product (GDP) of $1.0 trillion.

While growth in the industrialized world has been uneven over the last five years, Canada experienced only two quarters of negative growth during that period, one of which occurred during the global economic downturn in 2001. On average, the Canadian economy has expanded 3% each year since 1999.

Measuring the economy

Canada’s economy is dominated by the services sector, which generates more than two-thirds of our GDP and employs three out of four Canadians. With 3.3% average annual growth since 1999, the services sector has led economic growth on the strength of the wholesale and retail trades, the finance, insurance and real estate industries, and professional and technical services.

The goods-producing sector has not been quite as strong, but construction and manufacturing have proven consistent. Buoyed by the broad increase in commodity prices since 2003, our forestry, mining, oil and gas industries have also contributed to the economic growth.

International trade is fundamental to the Canadian economy, with four-fifths of our exports going to the United States. In 2004, the value of Canadian exports totalled $429.1 billion, an increase of more than 75% above the value when Canada, the United States and Mexico signed the North American Free Trade Agreement in 1994.

Imports, which reached $363.1 billion in 2004, have expanded at a similar pace. Since Canada consistently imports less than it exports, the net value of our international trade is in a surplus position.

Contribution to national GDP varies across Canada, with Ontario accounting for 40% of the total. The Northwest Territories, Nunavut and Yukon account for just over one-half of one percent. But GDP growth has not been limited to the country’s economic giants. While Alberta’s economy has grown by around two-thirds since 1999, smaller economies such as Newfoundland and Labrador and the Northwest Territories have also experienced booms.

How we earn and spend

Continued growth has allowed all segments of the economy to earn—and to spend—more. In 2004, persons and unincorporated businesses earned a total of $970.2 billion, up about 24% from 1999. At the same time, total expenditures have grown 26% since 1999, meaning that Canadians have been increasing spending faster than earnings.

Corporations and government business enterprises earned $318.8 billion in 2004, a 27% increase since 1999. More than nine-tenths of this gain came from strong growth in corporate profits before taxes.  

By 2004, total federal government income exceeded $207 billion. About 85% of that was received through taxes. Total income for provincial/territorial and local governments was $261 billion and $91.1 billion, respectively.

Government expenditures grew steadily over the period from 1988 to 2004, but they did so at different rates. Spending by provincial/territorial and local governments rose at an average annual pace of 4.6%, whereas federal government expenditures (including transfers) grew only 3.1%.

The federal government has racked up a string of budget surpluses since 1997, but the provinces and territories—despite consistent surpluses from some individual provinces—have collectively seen surpluses only twice since 1988.

Saving, investing, borrowing

Since Canadians have increased spending faster than we have increased our incomes, total saving has plunged, from $23.9 billion in 1999 to $10.7 billion in 2004.

Many Canadians have invested their money in property and have seen the value of their homes balloon. While this has boosted personal asset wealth, it has come at the cost of rising household liabilities. Canadians have been borrowing much more, up to a record $53 billion in 2004.

Conversely, corporate Canada has dramatically increased its level of saving and investment. As income rose much faster than expenditures from 1999 to 2004, Canada’s corporations set aside more money, increasing their savings almost threefold and their financial investments by more than 1,100%. Canadian businesses have also taken steps to become more productive, by increasing their investment in new machinery, equipment, computers and engineering projects.

Although the federal government has recently been successful in eliminating deficits, the overall level of debt remains a significant challenge. As of March 31, 2004, the Government of Canada owed $523.6 billion, representing 42% of Canada’s total GDP—equivalent to $16,427 of debt for every Canadian. While this is an improvement from the 1997 high of $588.4 billion, the interest payments alone still absorb more than 15% of the government’s annual income.