The Canadian Economy at a Glance

Updated July 2018

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, other than the United States, 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 production within a country. It measures the final value of all goods and services produced. 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 of a particular industry measures the economic activity directly generated by that industry. The GDP of a particular industry is not a measure of its profit or value added 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 2017, Canada’s reported GDP per year, in 2017 dollars, was running at $2.180 trillion or $2,180 billion per year. 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.

Data Source: Statistics Canada

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.

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.

Surprisingly, mining, quarrying, and oil and gas extraction is only the third largest item at 8.6% of GDP.

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 2017 GDP was consumed in the following fashion:

Personal consumption:     58%
Government consumption: 19%
Non-profit consumption:    1%
Business Investment (buildings and equipment): 19%
Government Investment: 4%
Net Exports:                  -1%

Total:                            100%

When you hear that Consumers “account” for about 58% 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 23% of Canada’s GDP is expended on investment in (the creation of) longer lasting assets such as buildings (including houses) and equipment rather than being consumed for immediate gratification. This includes replacing and upgrading worn out buildings and assets which may account for it being so high.

What does Canada Export?

At the end of 2017, Canada’s exports of goods and services were 30.5% as large as GDP and amounted to $666 billion. Here is a breakdown of Canada’s exports by category:

Data Source: Statistics Canada

The largest category of goods exports is Energy Products (oil, bitumen, natural gas and other) at 14.9% of total exports followed by  motor vehicles and parts at 13.5%. Perhaps surprisingly, Consumer Goods were the third largest category of exports at 10.5% which edged out Commercial Services also at 10.5%. Canada has a certain reputation for exporting relatively unprocessed natural resources. But despite exports of oil and natural gas and some raw metals, minerals and timber, the vast majority of exports are in the form of products and services.

To Which Countries Does Canada Export?

The answer to that question might be considered alarming:

Data Source, Statistics Canada

Given the current tensions over trade with the United States, it would be beneficial if Canada were less reliant on trade with the U.S. But the statistics for 2017 show that the United States accounted for the vast majority of Canadian goods exports at 75%. The European union collectively is the second largest export destination but accounted for only at 7.9% and China was third at only 4.5%.

Things may be changing and China is 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. Japan, in fouth polace, accoutsn for only 2.2% of Canada’s exports. The chart illustrates that fact that Canada’s exports to the all but a tiny handful of countries are almost insignificant. The extent of the reliance on exports to the U.S. is sobering and, given recent trade tensions, alarming.

What Does Canada Import?

Canadian Imports by Category:

As at Q4 2017, Canada’s seasonally adjusted and annualized imports of goods and services were 33.1% as large as 2017 GDP and amounted to $722 billion.  The following chart shows imports by segment as a percentage of total goods and services imports.

Data Source, Statistics Canada
The chart indicates that Consumer goods constitute 17% of total goods and services imports while motor vehicles and related constitute 15%. Commercial services and electronic & electrical equipment each constitute 9%. Energy products account for 5% of imports.

From Which Countries Does Canada Import Goods?

Data Source, Statistics Canada
The United States accounts for 65% of Canada’s goods imports. It has been noted that Canada’s imports from the U.S. are not a very large share of the GDP of the United States – at about 3%. That is true, but exports to Canada are crucially important to many of the individual exporting companies and their employees.

The European Union collectively accounts for 10%. China accounted 7% and Mexico for 4%. The remaining 14% is spread widely around the globe. Most of the other countries in the world are insignificant to Canada in terms of imports.

Shawn Allen, CFA, CMA, MBA, P.Eng.
President, InvestorsFriend Inc.
Originally created November 3, 2007, the latest annual update was July 1, 2018.