The Canadian Economy at a Glance
Updated with 2020 figures
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, construction, 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? What products is Canada a net exporter of adn what is it a net importer of. The sometimes surprising answers are provided below in a brief and graphical format.
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 2020, Canada’s reported GDP per year, in 2020 dollars, was running at $2.307 trillion or $2,307 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 2012 chained dollars, which, I understand, basically assumes that there were no relative price changes since 2012. 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 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 and rental and leasing” is the largest segment of Canada’s economy at 13.7%. And this does not include constructing real estate! The high percentage related to the use 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. The main component here is likely commercial leases of buildings. It also includes residential and commercial real estate brokers.
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 9.5%. 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 7.7% of GDP.
Review the rest of the chart to see the composition of the Canadian economy and the percent contribution of different segments. A few components of Canada’s GDP in 2020 were heavily distorted by the pandemic.
See the link to the source data just above to see the raw data if desired.
Who Consumes Canada’s GDP?
Canada’s 2020 GDP was consumed in the following fashion:
Personal Household consumption: 57%
Government consumption: 21%
Business Investment (buildings and equipment): 18%
Government Investment: 4%
Net Exports: 0%
When you hear that consumers “account” for most of Canada’s GDP, that does not mean that businesses account 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 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?
As a country, Canada imports goods and services that amount to close to 30% of GDP. That would not be sustainable unless exports were at a roughly similar level, which, luckily, they are.
At the end of 2020, Canada’s exports of goods and services were running at 28.5% as large as GDP and amounted to $657 billion annualized. Note the figures here are in actual current dollars. Statistics Canada also provides this in something it calls 2012 chained dollars. Basically, as I understand it, those chained dollars assume that inflation was equal across all sectors. Current dollars is by far the more relevant measure.
Here is a breakdown of Canada’s exports by category:
Data Source: Statistics Canada
The largest category of goods exports in current dollars is now commercial services which includes management services, financial services and information services. Motor vehicles and Energy Products (oil, bitumen, refined petroleum, natural gas and other) are a close second and third. Canada has a certain reputation for exporting relatively unprocessed natural resources. But despite exports of crude oil and natural gas and some raw metals, minerals and timber, the vast majority of exports are in the form of products and services.
You may see data claiming that Energy is the top export. That is based on something called chained 2012 dollars and is not realistic as it does not use current energy prices. As will be shown below, Energy is however, by far, the top net export.
To Which Countries Does Canada Export?
The answer to that question might be considered alarming:
(The above link gives monthly data and the chart is the sum of the 12 months of 2020.)
Note that our data source does not include services in the exports-by-country data.
The United States accounted for the majority of Canadian goods exports at 72%. The European Union collectively is the second largest export destination but accounted for only at 9.0% and China was third at only 5.0%.
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. Mexico, despite its proximity accounts for only 1.3%. The chart illustrates that fact that Canada’s exports to all but a tiny handful of countries are almost insignificant. Treating the European Union collectively, you can literally count all of Canada’s important trading destination countries on the fingers of one hand. 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 2020, Canada’s seasonally adjusted and annualized imports of goods and services were 30% as large as its GDP and amounted to $687 billion. The following chart shows imports by industry segment as a percentage of total goods and services imports.
Data Source: Statistics Canada
The data indicates that consumer goods are the largest import at 20.1% of the total. Motor vehicles and parts constitute 15.5% of total goods and services imports. Commercial services constitute 11.8% and Electronic & electrical equipment constitute 10.8%.
From Which Countries Does Canada Import Goods?
Note that our data source does not include services in the imports-by-country data.
The United States accounts for 62% 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 11%. China accounted for 9% and Mexico for 3%. The remaining 15% is spread widely around the globe. Most of the other countries in the world are insignificant to Canada in terms of imports.
For Which Products and Services is Canada a Net Exporter and For Which a Net Importer?
Canada is a net exporter of commodities including notably energy products, metal & mineral products, farm, fishing & intermediate food products, forestry products. To a smaller extent it is also a net exporter of aircraft & other transportation equipment & parts and commercial services (likely mostly banking and insurance).
Canada is a net importer of most manufactured and finished goods categories including consumer goods, motor vehicles & parts, industrial machinery, and electronic & electrical equipment.
Canadians don’t actually operate as one giant sort of “team”. But it can be argued or observed from this data that, for the country as a whole, the net exports of energy and commodity products are what pay the bills to allow the country to be very much a net importer of consumer and manufactured goods.
Shawn Allen, CFA, CMA, MBA, P.Eng.
President, InvestorsFriend Inc.
Originally created November 3, 2007, the latest annual update was May 19, 2021.