Purchasing power parities, 2015

Data on purchasing power parities (PPPs) for 2015 is now available. The PPP estimate includes prices of tradeable and non-tradeable goods and services by each country and is therefore the appropriate metric for comparing real income and consumption among countries. In contrast, market exchange rates are often driven by short term fluctuations in prices of tradeable products (oil and gold, for instance) and capital flows, therefore the market exchange rates do not fully reflect the domestic purchasing power.

Revisions

With this release, the bilateral Canada / United States program on PPPs was revised back to 2000. These annual revisions from 2000 to 2014 incorporate prices from the Organisation of Economic Cooperation and Development's (OECD) benchmark exercise for 2014.

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 System of National Accounts data 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.