Purchasing power parities, 2014

Data on purchasing power parities (PPPs) for 2012, 2013 and 2014 are now available.

Revisions

With this release, the bilateral Canada / United States program on PPPs was revised back to 1990. These annual revisions from 1990 to 2014 incorporate prices from the Organisation of Economic Cooperation and Development's (OECD) benchmark exercise for 2011. They also include revised current dollar expenditure, and corresponding price indexes from the Canadian System of National Accounts and the United States National Income and Product Accounts. Both Canada (September 2012) and the United States (July 2013) adopted the international System of National Accounts 2008 standard, which is now being used for the first time in the bilateral PPP program.

In addition, the data are now based on the most recent OECD-Eurostat Classification System of National Accounts (Round 2014). This new classification is also consistent with the 2008 System of National Accounts. It is structured by type of final expenditure—individual consumption, collective consumption and capital expenditure. Individual consumption is also categorized by sector: household, non-profit institutions serving households and governments.

These major changes have necessitated a new compilation of expenditure weights for both Canada and the United States, and a reassessment of historical benchmark prices. To insure consistency over time, new methodologies were implemented for the communication, education and health categories.

From 2008 onward, the new Canada / United States database is also supplemented with comparable and representative prices collected from various websites. These added prices are mainly concentrated in semi-durable and durable goods, in machinery and equipment and in individual services.

Updates to PPPs for the multilateral program have also been recompiled to reflect revisions made by the OECD from 1980 to 2014.

Definitions

Purchasing power parities are estimates of the relative purchasing power between two or more currencies. At the most basic level, it is a ratio of prices for a particular commodity in two countries, with the prices expressed in their respective national currencies. Adjusted to a common currency and a common set of prices, they can be used to make international comparisons of the relative volumes of goods and services invested in or consumed. They are calculated by dividing the price of a specific item of a specific quality in one country's currency by the price of the same item in the other country, in the currency of the other country.

United States per capita expenditures in current dollars are converted to Canadian dollars by dividing them by the Fisher PPPs. These converted expenditures are then expressed as a ratio of Canadian expenditures per capita.

Comparative price levels are calculated as the PPPs divided by the exchange rate. They measure the degree to which one country's price level is above or below another's. These ratios indicate the number of units of a common currency needed to buy the same volume of goods and/or services in different countries. The rates produced are also termed "real" exchange rates.

Data for PPPs and related series include consumption (International Comparison Program) and expenditure-based data System of National Accounts from the Canada / United States bilateral program. When making international comparisons, the consumption-based classification is more appropriate, as it is controlled for the various levels of government involvement in the financing of consumption between countries.