System of National Accounts Historical Revision, 1981 to the second quarter 2012

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The implementation of revised international System of National Accounts economic accounting standards resulted in no substantial change to the level, nominal growth rate or real growth rate of Canada's gross domestic product (GDP) from 1981 through the second quarter of 2012. Similarly, there was no material change to Canada's current account balance over this period. The revised accounts provide users with additional information that present a more comprehensive picture of the Canadian economy.

Revisions to the growth in gross domestic product

Revisions to the growth in GDP over the revision period were not substantial. Over the entire 1982 to 2011 period, the mean absolute revision to the annual nominal growth rate in GDP was 0.15 percentage points, while the mean absolute revision to the annual real growth rate in GDP was 0.14 percentage points. The largest upward revision in real growth occurred in 2008 (+0.4) while the largest downward revision occurred in 1999 (-0.4).

Of particular interest are the real rates of growth during business cycles characterized by a recession and a recovery period. The historical revision did little to change the depth or length of the economic contractions that occurred in 1982 and 1991.

Chart description: Impact of revisions to the growth in real gross domestic product

CSV version of the chart

In 1982, real GDP declined 3.0% and then increased 2.6% in 1983; both rates of growth were slightly lower than the previously estimated rates of growth. In 1991, real GDP declined 2.1%, the same rate of decline as was previously estimated.

Revisions to 2009 incorporate the annual benchmarks from the Canadian input-output tables. While the annual decline in real GDP in 2009 (-2.8%) remains the same, the decline in the fourth quarter of 2008 and first quarter of 2009 were more pronounced than previously estimated. Real GDP fell 1.1% in the fourth quarter of 2008 and 2.2% in the first quarter of 2009 compared with the previously estimated declines of 0.9% and 2.0%.

Revisions to the level of gross domestic product

In 2007 (the new base and reference year for the Canadian economic accounts), the nominal level of GDP was revised upward by $36.4 billion, or 2.4% of the previous estimate of GDP.

The main contributor to the increase in the level of GDP was an upward revision to investment. Both research and development activities and military weapons systems are now considered capital assets in the System of National Accounts and are included in the estimate of business and government investment.

Total expenditures by businesses and governments on investment in research and development were $20.8 billion in 2007, with $10.3 billion of the expenditures attributable to businesses and $10.5 billion to governments.

From 1982 to 2011, the average annual growth in investment by businesses and governments in research and development outpaced that of other types of investment. Investment in research and development grew at an average annual pace of 6.2%, while other types of investment grew at an annual pace of 5.3%. However, in the last five years the growth in investment in research and development has lagged other types of investment.

Revisions to the current and capital accounts

The major change associated with this revision is the articulation of new sectors, including non-profit institutions serving households, non-financial corporations, financial corporations and Aboriginal general governments.

The final consumption expenditures of non-profit institutions serving households accounted for 1.4% of total gross domestic product in 2007. From 1981 to 2011, their share of gross domestic product increased from 1.2% to 1.6%.

Financial corporations have taken on an increasingly important role in the corporate sector. Financial corporations' gross operating surplus as a share of total operating surplus increased from 4.9% in 1997 to 8.3% in 2011.

Aside from the increased sector detail, there were some changes to a number of the macro-economic indicators that emanate from existing sector accounts, most notably the household sector aggregates.

In the previous vintage of the Canadian economic accounts, the household sector included the activities of non-profit institutions serving households', Aboriginal general government and some financial corporations. In this new presentation, the sector only includes households and therefore more accurately reflects the incomes and expenditures of households. In addition, the definition of household disposable income is now aligned with the international standard in that transactions such as interest on consumer credit are removed before estimating disposable income.

As a result of these changes, household disposable income in 2007 was lowered by $45.1 billion or 5% compared with its previous reported value. Similarly, per capita household disposable income was $26,047, down from the previous estimate of $27,420.

Household expenditures were also lower with the redefinition of the sector, moving from 56% of GDP to 53% in 2007 under the new vintage. The level of household saving was also lower; however, the household saving rate exhibits the same trend as before — a gradual decline from 1981 to 2005 and a slight upward trend since 2005.

Revisions to the international accounts

In the balance of international payments (BOP), revisions did not materially change the current account balance over time.

The major statistical change to the current account was the upward revision to trade in services from the re-design of the survey vehicles and the incorporation of additional data sources. Both exports and imports of services were revised up, with exports generally revised up more than imports.

However, other revisions to the current account components have tended to revise up the overall current account deficits and revise down surpluses by small amounts over most of the time series from 1981.

The restructuring of the current account to include cross-border compensation of employees was one such revision that resulted in increased payments relative to receipts. Also, investment income payments on portfolio investment were revised up for a number of more recent years, reflecting an upward revision to foreign holdings of Canadian equity securities.

In the capital account and in the financial account of the BOP, statistical revisions from 1981 were minimal in terms of the balance.

The elimination of migrants' funds from transactions, as per the international standard, did alter the totals in both the capital and financial accounts. In addition, this caused a downward revision in the level of household net lending/borrowing.

Portfolio transactions were revised from 1999 forward, and there were some reclassification of transactions across financial account categories that resulted in a closer link to the assets and liabilities of the international investment position.

Similarly, in the international investment position, statistical revisions were moderate over the time series. At book value, Canada's net foreign debt was largely unchanged, except in more recent years (mainly, 1999 forward). In these years, government international loan assets were revised to reflect a more accurate recording of loan allowances and there was a large upward revision to foreign holdings of Canadian equity securities.

Market valuation of relevant international assets and liabilities is introduced from the first quarter of 1990 and becomes the official valuation of Canada's international investment position. This new measure of Canada's net foreign debt differs from the previous book value measure in earlier periods as the revaluation of assets was relatively larger than that for liabilities. In recent periods, the differences between the market and book value measures of net foreign debt have been relatively small.