Quarterly Monitor of the Canadian ICT Sector

Second Quarter 2007

Revised version: November 2007

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Gross Domestic Product

ICT output growth continues...

In the second quarter of 2007, Canada’s ICT sector output (GDP) grew over twice as fast (1.6%) as the Canadian economy as a whole (0.7%). Since the fourth quarter of 2001, there has been a clear upward trend observed in Canada's ICT sector. In fact, between the end of 2001 and the second quarter of 2007, ICT sector output increased by 31%, while the Canadian economy, as a whole, grew by 17%. ICT sector performance, as a long term trend, has been striking, and has grown by 117% since the first quarter of 1997. That is almost three times the growth rate of the Canadian economy (40%), over the same period.

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For a third consecutive quarter, ICT manufacturing GDP has grown, up by 3.4% in the second quarter of 2007, surpassing the 0.5% increase recorded by Canadian manufacturing GDP. This quarter marks the highest growth rate recorded since the first quarter of 2005 for ICT manufacturing GDP and it has displayed an overall positive trend. Specifically, it has grown by 47% since the end of 2001, and by 63% since the beginning of 1997. To put these values into perspective, the entire Canadian manufacturing sector has grown by 25% since 1997.

The ICT services sub-sector grew by 1.2% in the second quarter of 2007, while overall Canadian services GDP grew by 0.9%. Both ICT services industries and the Canadian services sector, as a whole, have displayed positive trends over the long term. Since the last quarter of 2001, they have grown by 28% and 19%, respectively.

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Services industries in the ICT sector have experienced persistent growth since the first quarter of 1997, and output in the second quarter of 2007 was 136% above the level recorded in the first quarter of 1997, exceeding the performance of overall Canadian services, which grew 46% over the same period.

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This quarter, growth in ICT manufacturing GDP was largely attributed to the 6.3% growth recorded in the computer and peripheral equipment industry. The instruments industry also rose this quarter by 3.4%. After two consecutive quarters of recorded growth, the communications equipment industry fell by 2.9% in the second quarter of 2007, while the electronic components industry remained relatively stable.

All ICT services industries exhibited positive growth this quarter. Growth was led by a 2.4% increase in the software industry. This industry has recorded continuous growth since the third quarter of 2004.

The computer systems design and telecommunications services industries also grew in the second quarter of 2007, by 1.0% and 0.8%, respectively. Uninterrupted growth has been observed in the computer systems design industry since the beginning of 1997, while the telecommunications services industry has displayed an overall positive trend within the same period. The data processing services industry remained relatively stable (0.1%) this past quarter, and has recorded growth since the beginning of 2006.

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Manufacturing Shipments

ICT manufacturing shipments are up...

Shipments of ICT manufacturers and overall Canadian manufacturing shipments grew this quarter by 3.3% and 0.7%, respectively. ICT manufacturing shipments have grown for a third consecutive quarter and are now at their highest level recorded since the second quarter of 2004.

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Overall, ICT shipments have grown at a moderate rate since the fourth quarter of 2004. Since then, the average growth rate per quarter has been 0.9%, and shipments in the second quarter of 2007 were 8.9% higher than in the fourth quarter of 2004.

...with substantial gains in computer and peripheral equipment manufacturing.

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This quarter, substantial growth was recorded for shipments in computer and peripheral equipment (25%), while shipments in the remaining key industries declined. Shipments in communications equipment dropped by 4.2%, this quarter. Despite this fall, shipments of communications equipment recorded a significant growth rate in the first quarter of 2007 and have displayed an upward trend since the beginning of 2005. For a second consecutive quarter, shipments in both electronic components (-9.5%) and instruments (-4.5%) declined.

Employment^*

ICT employment grew moderately...

In the second quarter of 2007, the number of employees in the ICT sector and the Canadian economy increased by 0.2% and 0.5%, respectively. For the ICT sector, this number has grown continuously since the last quarter of 2005.

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Although the number of employees in Canadian manufacturing declined by 0.7% this quarter, the decline in ICT manufacturing was more pronounced (-1.4%). The number of employees in ICT manufacturing declined at an average rate of 1.4% per quarter from the beginning of 2001 to the end of 2004, and continued to decline thereafter, but at a slower rate of 0.4% per quarter. On the other hand, Canadian manufacturing employment declined at an average rate of 0.5% since the beginning of 2005.

In the second quarter of 2007, the number of employees in ICT services grew by 0.6%, to reach its highest employment levels to date, while growth experienced by the Canadian services sector was 0.7%. Since the first quarter of 2002, the number of employees in ICT services has been trending upwards, and the level is now 8.7% higher.

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The decline in ICT manufacturing employment was mainly attributable to the 6.2% drop in employment figures for the communications equipment industry. This is the largest drop recorded for this industry since the significant decline in the second quarter of 2001. A marginal decline in employment was also recorded in the instruments industry (-0.2%). After two consecutive quarters of decline, both the computer and peripheral equipment (0.9%) and the electronic components (0.4%) industries displayed slight improvements in employment in the second quarter of 2007.

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Employment grew for all but one of the key services industries, this past quarter. The number of employees in the software industry grew for a fifth consecutive quarter by 2.2%, and has steadily increased in value since the beginning of 2004. Growth was also observed in the computer systems design industry (0.7%). After four consecutive quarters of decline in employment, the telecommunications services industry (0.2%) recorded growth this quarter. Although the data processing services industry has been growing since the first quarter of 2006, this quarter it fell by 1.4%.

^{*See note 1 at the end of the page. back}

Exports of Goods

Exports of ICT goods fell...

In the second quarter of 2007, total ICT exports fell by 3.9%, while overall exports of Canadian goods fell moderately by 0.4%. Despite the drop this quarter, exports of Canadian ICT goods have experienced overall growth since reaching a low in the fourth quarter of 2003. Since then, exports of ICT goods from Canada have grown by 24%, or an average quarterly growth rate of 1.5%.

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...led by a decline in computer and peripheral equipment.

All key product groups for ICT exports fell this quarter. The most significant drop was experienced by computer and peripheral equipment (-8.1%). Although this drop is significant, it does not characterize the recent trend observed. Specifically, since the last quarter of 2003, exports have remained stable.

After three consecutive quarters of growth, exports of communications equipment declined by 5.2% this quarter. Particularly, exports of wired products grew by 3.9%, but were largely offset by the 23% drop in wireless exports. Nevertheless, communications equipment exports have been growing since the last quarter of 2003, and are now 50% higher.

Instruments exports fell by 3.0% this period, but have been trending up since the beginning of 1997, and are now 107% higher.

Since the beginning of 2006, with the exception of the last quarter that year, exports of electronic components have declined, and in the second quarter of 2007 fell by 1.0%. This quarter, exports in this product group recorded their lowest levels over the entire analyzed period. The decline in electronic components has somewhat stabilized over the past three quarters, having declined on average 0.1% per quarter.

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Market for ICT goods continues diversifying...

After three consecutive quarters of growth, exports to the US declined, and are now 1.6% below the level recorded in the first quarter of 2007. However, the share of Canadian ICT exports going to the US increased marginally to 66%. This market continues to be Canada's main trading partner, despite a decline in shares since the second quarter of 2000, when the share was at its highest (85%).

ICT exports to Asia Pacific economies and the EU-25 & Russia fell this quarter by 0.5% and 16%, respectively. This is the largest drop recorded by the EU-25 & Russia, since the second quarter of 2001. While the share of exports to the Asia Pacific economies grew moderately to 12.4% this past quarter, the share for the EU-25 & Russia fell to 13.7%. Comparatively, ICT exports to the category 'other' (which includes the Middle East, Africa and Latin American countries) grew by 2.0% in the second quarter of 2007, and accounted for 8.4% of exports.

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Notes, Definitions and Sources

Contact: Sylvain de Tonnancour, (613) 954-2971