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The 1999-2000 revisions of the Provincial Input-Output Accounts

Manufacturing industries

This release of the Provincial Input-Output Accounts (PIOA) incorporates several changes for the manufacturing industries. Theses changes originate from the Annual Survey of Manufactures (ASM) that was redesigned for reference year 2000. A number of major conceptual and methodological changes were made to the ASM for that year. First, a different source, the Statistics Canada’s business register (BR) was used to identify in-scope entities. Second, the coverage was expanded to include all manufacturing sector.

The use of the BR has translated into a net increase of the number of firms in-scope. Of course, by increasing the coverage, manufacturing statistics resulted in very different levels compared to prior years. The new ASM shows a more robust industrial distribution within manufacturing sector. It also shows an improved provincial distribution of the manufacturing activities.

These changes were all incorporated in the PIOA, however they have a smaller impact in terms of level in the PIOA because historically the manufacturing statistics were always adjusted for undercoverage. Some adjustments were nevertheless made to the 1999 PIOA for the manufacturing industries to make the two years more comparable. From a commodity perspective, the net impact of incorporating the improved ASM is that outputs and inter-provincial trade flows series have increased significantly.

Beginning with reference year 2000, data for head offices of manufactures are no longer included in the ASM results. This reflects a strategy of the Agency to survey directly theses entities in order to improve industry statistics. The results of this survey were incorporated in the PIOA. The impact is explained in the note below.

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Head Office

At Statistics Canada, head offices are identified as separate units, with geographical locations to which employment and capital expenditures are assigned. However, one should note that there is no separate head office industry in the Input-Output Accounts. Each head office is classified to the industry of the dominant establishment within a given enterprise.

In the Provincial Input-Output Accounts (PIOA), which are prepared on an establishment basis, a transaction is created between the head office unit and other establishments within a given company or enterprise. Revenue from head office service is imputed for the head office unit and routed to establishments within the firm as an expense, thus reducing the value added of each establishment being served. This allocation of expenses is based on the relative wages of establishments within the enterprise and its final outcome is to move economic activity to the province where the head office is located.

Beginning in reference year 2000, the PIOA includes estimates of head office activity as measured by the Annual Survey of Head Offices and Other Business Support Units. Although previous releases of the PIOA have included head office estimates, the inclusion of the new survey data has lead to a more robust treatment of head office activity. Specifically this new data source has provided expanded coverage in terms of head office units, and improved provincial and industrial distributions. These improvements have resulted in significant shifts in the time series.

Until reference year 2000, the Annual Survey of Manufactures was the only survey accounting formally for the economic activities of the head office establishments in its statistical outputs. For all other industries, head offices were not separately identified. In contrast to the new approach where head office expenses are allocated across provincial and industrial boundaries to all establishments within a firm, the former allocation approach was restricted to manufacturing industries. The new allocation methodology is therefore more comprehensive and significantly improved.

In Canada, a large number of corporate headquarters and head offices are located in Ontario. As such the net effect of the head office allocation process is to move economic activity into Ontario. From a commodity perspective, the impact of the head office allocation process can be seen in the “Other Administrative and Business Support Services” commodity, where outputs and inter-provincial trade flows series have increased significantly.