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2
TRANSPORTATION AND
THE CANADIAN ECONOMY
The Canadian Economy
After four consecutive years of close to four per cent annual
growth, the Canadian economy slowed down in 2001. Real Gross Domestic
Product (GDP) at market prices grew by only 1.5 per cent. In each
of the first two quarters the economy grew at an annual rate of
about one per cent, but retracted in the third quarter by 0.1
per cent. It then recovered and grew by two per cent in the fourth
quarter. The decline in economic growth in the third quarter was
the first since early 1992. This slowdown followed a slowdown
in the US economy that started in the second half of 2000. Business
investment fell, particularly high-tech investment as shown in
Figure 2-1. As the economy slowed, industrial capacity utilization
fell from 86.3 per cent in the second quarter of 2000 to 80.3
per cent in the fourth quarter. The events of September 11 further
depressed economic activities.
Business investment rose by 0.7 per cent in real terms in 2001,
compared with an annual average of almost eight per cent between
1996 and 2000. Investment in machinery and equipment fell by 1.6
per cent, while investment in office equipment fell 5.9 per cent,
a sharp reversal of the more than 40 per cent average increase
over the previous five years. Consumer spending remained strong
in 2001, rising 2.5 per cent over 2000 but it did drop in the
third quarter, as consumer confidence fell to its lowest level
since 1996. Spurred by very low interest rates, housing purchases
remained strong, and real residential investment rose 4.4 per
cent in 2001. Government spending on goods and services rose 2.2
per cent while government capital spending rose 6.8 per cent.
Manufacturing output fell 3.9 per cent, in contrast to the
four per cent average increase of the previous five years. Mining
activity increased 2.5 per cent, while agriculture activity fell
10.3 per cent and forestry activity fell 3.7 per cent. Construction
activity was up 3.1 per cent. Overall production in goods-producing
industries fell 2.2 per cent while service sector output rose
by 2.6 per cent. Retail trade activity remained strong, increasing
by 2.7 per cent. Transportation and warehousing output fell 2.5
per cent, reflecting the fall in goods production. Figure 2-2
charts the changes in the Real GDP since 1995.
As Figure 2-3 shows, economic growth slowed in all major economic
regions of the world in 2001. World economic growth is expected
to be about two per cent. This is the first time that such a worldwide
synchronized economic slowdown has occurred since the early 1980s.
The US economy entered a mild slowdown in the second half of 2001
and only registered real growth of 1.2 per cent during the year,
down sharply from the 4.1 per cent growth the previous year. The
recession in Japan meant that growth in the Asia-Pacific region
(including China) grew by just 0.6 per cent in 2001. Western Europe,
which has been hit by high oil prices and slowing exports, grew
by 1.4 per cent, down from 3.5 per cent in 2000. Latin America's
real economic growth was only one per cent in 2001. This global
economic slowdown has had an impact on economies relying on exports.
Mexico, which is particularly dependent on exports to the United
States, faced almost zero growth for 2001.
As Figure 2-4 shows, Canada's merchandise trade balance rose
by $2 billion in 2001 to $61.5 billion, as imports ($12.3 billion)
fell more than exports ($10 billion). This performance is in sharp
contrast to average annual growth rates of 12 per cent for exports
and 11 per cent for imports for the nine years since the last
recession in 1991. Exports to the United States fell by 2.4 per
cent, while imports from the United States fell 4.6 per cent.
Exports of machinery and equipment and of automotive products
fell 5.3 per cent, and forestry product exports fell 7.5 per cent.
These decreases were offset by increases in energy products and
in agriculture and fish products, which increased 4.5 per cent
and 12.5 per cent, respectively. The drop in imports reflects
the drop in machinery and equipment imports of 8.2 per cent and
in automotive products of 6.3 per cent. These two categories of
imports account for 55 per cent of total imports.
The average value of the Canadian dollar fell 4.1 per cent
in 2001 to US$0.646. The dollar closed the year at US$0.628. Price
increases in the economy were quite modest, as the GDP deflator
(a broad indicator of prices) rose 1.2 per cent in 2001 while
the Consumer Price Index (CPI) rose 2.6 per cent. Excluding the
effect of energy prices and food, the CPI rose two per cent. The
energy prices that consumers paid rose 3.2 per cent, a big reduction
from the 16.2 per cent increase in 2000. The moderation in energy
prices contributed to the fact that the average prices that consumers
paid for transportation in 2001 were unchanged from 2000.
Real disposable income per capita rose 1.3 per cent in 2001,
down from a 2.6 per cent increase in 2000.
The number of people employed rose 1.1 per cent in 2001, half
the average increase of the previous five years. The population
of Canada reached 31,082 thousand, a one per cent increase from
2000. This rate of population increase was slightly higher than
the 0.9 per cent of the previous five years, a situation explained
by the large number of immigrants.
The Canadian Economy
Appendix 2-1 Personal Expenditures
on Transportation, 2001
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