Telling Canada s story in numbers Elizabeth Richards Analytical Studies Branch April 20, 2017

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1 Recent Developments in the Canadian Economy: How have the decline in oil prices and a weaker Canadian dollar affected Canada s economy? Telling Canada s story in numbers Elizabeth Richards Analytical Studies Branch April 20, 2017 Catalogue no X ISBN

2 Outline The objective of the presentation is to highlight key changes in the economic data since oil prices began to decline in mid The presentation focuses on: 1. Recent trends related to economic growth and labour market conditions 2. Impact of lower oil prices in current dollar terms 3. Impact of lower oil prices in volume terms 4. Impact of the weaker Canadian dollar on merchandise trade and manufacturing. 2

3 Topic 1 Recent trends related to economic growth and labour market conditions 3

4 To what extent has the value of the Canadian dollar been influenced by lower oil prices? Crude oil prices and the value of the Canadian dollar CAN$/US$ U.S. dollars per barrel Canadian dollar West Texas Intermediate Sources: Statistics Canada, CANSIM table , U.S. Energy Information Administration. 4

5 To what extent have lower energy prices contributed to recent trends in total commodity prices? Commodity price index index (January 2007 = 100) Total, all commodities Total excluding energy Energy Source: Statistics Canada, CANSIM table

6 How does Canada s recent economic performance compare with other major economies? Real Gross Domestic Product (GDP), expenditure-based, chained volumes index ( 2000=100) Note: = first quarter. Source: OECD, Quarterly National Accounts. Canada United States United Kingdom Germany France Japan 6

7 At what pace has the economy expanded since the recession? Real GDP, annual growth percent % average growth 2.6% average growth Source: Statistics Canada, CANSIM table

8 What contributed to the slowdown in economic growth? Percentage point contribution to real GDP growth, by expenditure component Imports - services Imports - goods Exports - services Exports - goods Investment in inventories General governments gross fixed capital formation Business gross fixed capital formation - machinery and equipment Business gross fixed capital formation - non-residential structures Business gross fixed capital formation - residential structures Household final consumption expenditure Gross domestic product at market prices Source: Statistics Canada, CANSIM table

9 What types of final expenditures contributed to the slowdown in 2015 and 2016? Real GDP, selected aggregates index ( 2007 = 100) Household final consumption expenditure Non-residential structures, machinery and equipment General governments final consumption expenditure Exports of goods Exports of services Note: = first quarter. Source: Statistics Canada, CANSIM table

10 Which industries contributed to slower economic growth in 2015 and 2016? Real GDP, by selected industries index (January 2007 = 100) Source: Statistics Canada, CANSIM table Information and communication technology sector Mining, quarrying, and oil and gas extraction Construction Manufacturing Real estate and rental and leasing Professional, scientific and technical services 10

11 Which provinces experienced the sharpest declines in 2015? Annual growth of real GDP by province, 2014 and 2015 percent Canada 2.6% Canada 0.9% Newfoundland and Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Sources: Statistics Canada, CANSIM tables and

12 How did employment adjust as output slowed in 2015 and 2016? Real GDP and employment year-over-year change (percent) Real gross domestic product Sources: Statistics Canada, CANSIM tables and Employment 12

13 How did the composition of employment growth adjust based on recent events? Type of employment year-over-year change (thousands of persons) Full-time employment Part-time employment Source: Statistics Canada, CANSIM table

14 To what extent did gains in services offset employment declines in goods industries? Employment in goods and services year-over-year change (thousands of persons) Goods-producing sector Services-producing sector Source: Statistics Canada, CANSIM table

15 How did the labour market in Alberta adjust to lower activity in oil and gas industries? Employment and unemployment rates, Alberta employment rate (percent) unemployment rate (percent) Employment rate Unemployment rate Source: Statistics Canada, CANSIM table

16 Topic 2 Impact of lower oil prices in current dollar terms 16

17 To what extent did Canada s industrial composition shift towards energy prior to the recent drop in oil prices? Contribution to nominal GDP for selected industries Mining and oil and gas extraction Manufacturing Construction percent Sources: Author's calculations; Statistics Canada, CANSIM table , and

18 How has Canada s trade balance been affected by the decline in oil prices? Merchandise trade balance, energy and non-energy commodities billions of dollars Energy Non-energy Total Source: Statistics Canada, CANSIM table

19 To what extent have non-energy exports offset the energy-related declines? Merchandise exports by commodity group index (January 2007=100) Total Energy Non-energy Source: Statistics Canada, CANSIM table

20 How did lower exports of energy products impact Canada s current account position? Current account balances, by income source millions of dollars 25,000 20,000 15,000 10,000 5, ,000-10,000-15,000-20,000-25, Primary income Secondary income Services Goods Total current account Source: Statistics Canada, CANSIM table

21 Has the weaker exchange rate led to a lower US- Canada purchasing power parity (PPP)? Purchasing power parity versus exchange rate US$ per CAN$ U.S. Canada PPP U.S. Canada market exchange rate Note: PPP refers to purchasing power parity. Q refers to quarter. Sources: Macdonald and Rispoli, A Historical Perspective on Recent Movements in Canada's Purchasing Power Parity; Statistics Canada, CANSIM table

22 Topic 3 Impact of lower oil prices in volume terms 22

23 Have lower energy prices led to lower volumes of energy products exported? Energy exports, in current and chained (2007) dollars millions of dollars 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4, Energy exports in current dollars Energy exports in chained (2007) dollars Sources: Statistics Canada, CANSIM ,

24 Which industries were affected by the decline in oil prices? Real GDP, selected industries index (January 2007=100) Source: Statistics Canada, CANSIM table Conventional oil and gas extraction Non-conventional oil extraction Support activities for mining and oil and gas extraction Crude oil and other pipeline transportation

25 What type of investments contributed to lower output growth? Business gross fixed capital formation index ( 2007=100) Total business gross fixed capital formation Non-residential structures Residential structures Machinery and equipment Intellectual property products Note: =first quarter. Source: Statistics Canada, CANSIM table

26 Have trends in real gross national income differed from those in real GDP given recent events? Cumulative growth of real gross domestic product versus real gross national income index (2001 Q3=100) Real gross domestic product Real gross national income Note: Q3 stands for third quarter. Source: Macdonald and Rispoli, How big was the Effect of Falling Commodity Prices on Canadian Real Incomes between mid and mid-2016?; Statistics Canada CANSIM table

27 Topic 4 Impact of the weaker Canadian dollar on merchandise trade and manufacturing 27

28 Which commodity groups led non-energy trends in 2015 and 2016? Exports, trend-cycle estimates, selected commodities index (January 2013=100) Non-energy: trend-cycle Motor vehicles and parts: trend-cycle Forestry products and building and packaging materials: trend-cycle Consumer goods: trend-cycle Aircraft and other transportation equipment and parts: trend-cycle Metal ores and non-metallic minerals: trend-cycle Source: Author's calculations, Statistics Canada, CANSIM table

29 Which manufacturing industries experienced growth in 2015 and 2016? Real GDP, selected manufacturing industries index (January 2007=100) Wood product manufacturing Machinery manufacturing Motor vehicles and parts manufacturing Aerospace product and parts manufacturing Source: Statistics Canada, CANSIM table

30 How has manufacturing employment adjusted given recent economic events? Manufacturing employment, Canada and selected provinces index (January 2007=100) Canada Quebec Ontario Alberta Source: Statistics Canada, CANSIM table

31 Recent developments in the Canadian economy Since oil prices started to decline in mid-2014, the pace of economic growth has slowed, reflecting lower business investment, while exports and household spending have continued to support growth. Non-energy exports have not offset energy-related declines. The composition of employment growth has changed, as full-time declines, concentrated in Alberta, have been more than offset by broad-based gains in part-time work in Full-time employment has increased in early Economic conditions in Alberta have changed markedly since mid

32 References Macdonald R., and L. Rispoli. 2016a. A Historical Perspective on Recent Movements in Canada s Purchasing Power Parity. Economic Insights, no Statistics Canada Catalogue no X. Ottawa: Statistics Canada. Macdonald R., and L. Rispoli. 2016b. How big was the Effect of Falling Commodity Prices on Canadian Real Incomes between mid-2014 and mid- 2016? Economic Insights, no Statistics Canada Catalogue no X. Ottawa: Statistics Canada. OECD (Organisation for Economic Co-operation and Development) Quarterly National Accounts: Gross domestic product expenditure approach. OECD Quarterly National Accounts (database). Available at: (accessed March 9, 2017). U.S. Energy Information Administration Cushing, OK, WTI Spot Price FOB Monthly. Spot Prices for Crude Oil and Petroleum Products (table). Available at: (accessed April 4, 2017). 32

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