The Canadian Economy at a Glance

Updated April 2017

Which industries contribute the most to Canada’s economy? In terms of Gross Domestic Product (GDP) what are the percentages from oil and gas, real estate, government services, forestry, farming, financial services and manufacturing etc.? The answers below might surprise or even shock you.

What portion of Canadian GDP do imports and exports make up? What products does Canada Import and Export? Which countries are important trading partners of Canada?

Firstly, what is the meaning of GDP?

GDP or Gross Domestic Product refers to the total dollar value of recorded economic activities within a country. The GDP of a particular industry is (roughly) the value of its sales minus the costs of goods or services purchased from other entities. The GDP is a particular industry is not a measure of its profit since it does not deduct the cost of labour from the value of sales. GDP is often criticized because it does not include the value of unpaid work or of unreported economic activities such as the “underground economy”. Nevertheless, GDP is the best available figure for use in understanding the economy and the relative importance of each industry to the economy.

What is Canada’s GDP by industry or sector?

As of the end of 2016, Canada’s reported GDP per year, in 2016 dollars, was $2.068 trillion or $2,068 billion. The following chart shows the percentage contribution of the various goods and services sectors to the total. Note however that this is based on something Statistics Canada calls 2007 chained dollars, which basically assumes that there were no price changes since 2007. I would prefer to use current dollars. However, for complicated reasons, Statistics Canada produces figures on GDP by industry in current dollars only on a three year lag basis. In current dollars the contribution of the energy sector would likely fall versus the chained dollars approach.

Data Source: Statistics Canada
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gdps04a-eng.htm

From reading the financial news you may have been under the strong impression that Canada’s GDP is dominated by the commodities including particularly oil, gas, and various minerals. You may have also heard that manufacturing is no longer such an important component of Canada’s economy. (And that therefore we should not worry much about any manufacturing job losses that we hear about).

The actual figures show that “Real estate selling managing, renting and leasing” is the largest segment of Canada’s economy at 13.0%. And this does not include constructing real estate. The high percentage related to the use of of real estate may seem high. But then again perhaps the most defining characteristic of any developed economy is the presence of buildings and improved land of all sorts.

Manufacturing, while it may be lower than in years past, is still a very large portion of GDP and is the second largest component at 10.4%. Note that manufacturing includes process industries such as oil refineries, pulp mills and chemical plants.

Mining, quarrying, and oil and gas extraction is only the third largest item at 8.2% of GDP. And this may be over-stated because Statistics Canada reports this on the basis of something it calls 2007 chained dollars which does not factor in the significant price drops of these commodities since 2007. Statistics Canada apparently updates the figures to actual current dollars only on a three year lag basis.

Overall, goods-producing industries account for 29% of GDP while service-producing industries account for 71%. The heavy reliance on services may alarm some people. But note that services include health care, education and the retailing and wholesaling of goods.

Review the rest of the chart to see the composition of the Canadian economy and the percent contribution of different segments. See the link to the latest available source data just above to see the raw data and you can calculate the precise percentage figures if desired.

Who Consumes Canada’s GDP?
Canada’s 2015 GDP was consumed in the following fashion:

Personal consumption:     56%
Government consumption: 21%
Non-profit consumption:    1%
Business Investment (buildings and equipment): 19%
Government Investment: 4%
Net Exports:                  -1%

Total:                            100%

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ04-eng.htm

When you hear that Consumers “account” for about 56% of Canada’s GDP, that does not mean that business accounts for little. In fact Businesses and (yes) government create the GDP and Consumers consume the largest share. This should not be considered surprising or alarming. Why else should things be produced except for consumption? (and for some investment to fuel future consumption).

A surprisingly large 22% of Canada’s GDP consists of investment in longer lasting assets such as buildings (including houses) and equipment rather than being consumed for immediate gratification. This includes replacing worn out buildings and assets which may account for it being so high.

What does Canada Export?

At the end of 2016, Canada’s exports of goods and services were 31.6% as large as GDP and amounted to $654 billion. This is based on seasonally adjusted and annualized Q4 2016 export figures and using calendar year 2016 GDP in current dollars of $2,068 billion.

Canadian Economy Annualized and Seasonally Adjusted Goods and Services Exports by Category as of Q4 2016:

Data Source: Statistics Canada
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3800070

The largest category of goods exports is motor vehicles and parts at 14.4% of total exports which edged out  Energy Products (oil, bitumen, natural gas and other) at 14.3% metals & minerals are third at 12.3%, consumer goods are third at 11.5%, Energy products were historically the top export category but fell dramatically in 2015 in dollar terms (though not in volume) and have only partly recovered as of Q4 2016.

To Which Countries Does Canada Export?

Data Source, Statistics Canada
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gblec02a-eng.htm

We hear a lot of talk about global trade. We hear about China buying Canada’s commodities. But the statistics for 2016 show that the United States still accounted for the vast majority of Canadian exports at 77%. The European union collectively, but excluding the UK. is the second largest export destination at 4.7% and China is third at only 4.4%. Things may be changing and China may quickly start to be an important  “customer” country for Canada. But the fact is, for now, when it comes to Canadian exports, the United States remains our number one destination by far. There are only 15 countries to which Canada exports more than $2 billion worth of goods annually. Most of the 192 or so countries in the world are insignificant to Canada in terms of our exports.

What Does Canada Import?

Canadian Imports by Category:

As at Q4 2016, Canada’s seasonally adjusted and annualized imports of goods and services were 32.5% as large as 2015 GDP and amounted to $673 billion.  The following chart shows imports by segment as a percentage of total goods and services imports.

Data Source, Statistics Canada
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3800070

The chart indicates that Consumer goods constitute 18% of total goods and services imports while motor vehicles and related constitute 16%. Consumer goods and  and electronics each constitute 10%.

http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3760108

From Which Countries Does Canada Import Goods?

 

Data Source, Statistics Canada
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gblec02a-eng.htm 

The United States accounts for 66% of Canada’s goods imports. China accounts for 7%. The European union excluding Germany and the U.K. accounts for 6%. The remaining 21% is spread widely around the globe. Most of the 192 or so countries in the world are individually insignificant to Canada in terms of imports.

END
Shawn Allen, CFA, CMA, MBA, P.Eng.
President, InvestorsFriend Inc.
Originally created November 3, 2007, the latest annual update was April 18, 2017.