Investment and Capital Stock Statistics
Capital is a key input into production. The condition and level of a nation’s capital in many ways determines its productive capacity both now and into the future. The role that capital plays in understanding the productive capacity of an economic territory makes it an important macroeconomic statistic and a key component of the Canadian System of Macroeconomic Accounts.
Statistics Canada has been producing measures of gross and net capital stock, by industry, for broad categories of assets (machinery and equipment, building construction, engineering construction, intellectual property products) for many years.
Capital can be examined from both a flow and a stock perspective. Capital flows represent the amount of new capital entering the asset boundary of an economic territory within an accounting period. The flow of capital is strongly related to the business cycle as it is a sound indicator of future demand. While the flow of capital can be used to help understand the latest economic trends, the stock of capital is equally important. The stock of capital (or capital stocks) is an important part of national wealth and speaks to the level of production that can be carried out at any given point in time. This wealth perspective is more representative of overall economic welfare, in that it contributes to a better understanding of the economy’s ability to generate services and goods for its residents (or that can be sold by its residents).
Capital stocks are reproducible tangible or non-tangible assets that are used as factors of production in combination with other factor inputs, such as labour, energy and other natural resources or materials. The stock of capital consists of buildings (such as hospitals and office buildings), engineering construction (such as roads and dams), machinery and equipment, and intellectual property products used in the production process. These are distinguished from non-reproducible assets such as land and natural resources, which are not produced but are directly incorporated into the production of other commodities.
Estimates of Canada’s capital stock are compiled using the perpetual inventory method (PIM) which consists of starting with an initial stock estimate, adding the current year’s investment flow, subtracting any wear and tear on the existing stock or any material loss, and then inflating the resulting stock to reflect the current period’s prices. This PIM methodology is followed by most national statistical organizations when compiling estimates of capital stock. A benefit of the PIM model is that it integrates the capital stock with the investment flows and the consumption of fixed capital (the part of the capital stock that has been used or consumed during the production process).
Currently, Statistics Canada groups capital stock and related statistics into the following:
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