The Canadian Economy at a Glance

Updated March 2016

Do you have any clear idea of what Canada’s economy looks like? In terms of Gross Domestic Product (GDP) what are the percentages from oil and gas, forestry, financial, manufacturing etc.? The answers below might surprise 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 the total dollar value-added by recorded economic activities within a country. The GDP of a particular industry is (roughly) the value of its sales minus the intermediate costs of goods or services purchased from other entities. 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?

In 2015, Canada’s reported GDP, in 2015 dollars, was $1.99 trillion or $1,986 billion. The following chart shows the percentage contribution of the various goods and services sectors to the total. Note, this is based on something Statistics Canada calls 2007 chained dollars, which basically assumes that there were no price changes since 2007. I am attempting to obtain the numbers for 2015 based on current dollars. However Statistics Canada produces figures on GDP by industry in current dollars on a three year lag basis. In current dollars the contribution of the energy sector will fall greatly versus the chained dollars approach.

2015GDPtoo

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%. And this does not include constructing real estate.

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 11%. (We understand that manufacturing includes refining industries).

Mining, quarrying, and oil and gas extraction is third at 8% of GDP. Unfortunately, this is significantly 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. Statistics Canada apparently updates the figures to actual current dollars on a three year lag basis.

Overall, goods-producing industries account for 30% of GDP while service-producing industries account for 70%. 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 expenditure: 21%
Non-profit expenditure:    1%
Business Investment (buildings and equipment): 20%
Government Investment: 4%
Net Exports:                  -2%

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 24% 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 2015, Canada’s exports of goods and services were 31% as large as GDP and amounted to $611 billion. This is based on seasonally adjusted and annualized Q4 2015 export figures and using calendar year 2015 GDP in current dollars of $1,986 billion. I have omitted $15 billion of “other balance payments and special transactions” since they don’t fit into any category.

Canadian Economy Annualized Goods and Services Exports by Category as of Q4 2015:

2015Exports

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 15.6% of total exports, metals & minerals are second at 12.4%, consumer goods are third at 12.2%, Energy Products (oil, natural gas and other) are fourth at 12.0%. Energy products were historically the top export category but fell dramatically in 2015 in dollar terms.

To Which Countries Does Canada Export?

2015 Export countries

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 our commodities. But the statistics for 2015 show that the United States still accounted for the vast majority of Canadian exports at 78%. The European union collectively is the second largest export destination at 8% and China is third at only 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. 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 2015, Canada’s seasonally adjusted and annualized imports of goods and services were 33% as large as 2015 GDP and amounted to $651 billion. This omits $18 billion in “other adjustments and special transactions” which do not fit into any of the categories. The following chart shows imports by segment as a percentage of total goods imports.

2015imports

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% and electronics constitute 10%.

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

From Which Countries Does Canada Import Goods?

importcountries

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

The United States accounts for 70% of Canada’s goods imports. The European union in total accounts for 10%, China accounts for 7%. The remaining 13% is spread widely around the globe. Most of the 192 or so countries in the world are insignificant to Canada in terms of imports.

END
Shawn Allen
InvestorsFriend Inc.
Originally created November 3, 2007, last annual update was March 23, 2016.