Study: Real growth of Canadian manufacturing, since 2000

Released: 2017-06-27

Manufacturing is an important sector of the Canadian economy. Over much of Canada's economic history, real output growth from manufacturing broadly kept pace with output growth from the business sector overall, as declines in some manufacturing industries were more than offset by growth in others.

A new study released today by Statistics Canada shows that this changed markedly after 2000, as the Canadian manufacturing sector adjusted to significant changes in the global economic environment, including: the bursting of the tech bubble in 2001; the global commodity price cycle; the appreciation of the Canadian dollar vis-à-vis the U.S. dollar; and stronger competition from abroad.

The result is that after 2000, manufacturing output growth levelled off and then declined sharply.

The 2008-2009 recession exacerbated the impact of these challenges. Real output in manufacturing declined at an annual average rate of about 9% during the recession, compared with a less than 2% average annual contraction in the business sector overall. Following the end of the recession, the recovery in manufacturing was the slowest since the Second World War, as the sector did not return to pre-recession levels for nearly six years. Real output in this sector remains significantly lower than peak levels observed in 2006 (Chart 1).

While U.S. real manufacturing gross domestic product also slowed compared with the U.S. business sector since the recession, the difference was significantly more pronounced in Canada.

Chart 1 
Real gross domestic product (GDP), business sector and manufacturing, chained Fisher quantity index of GDP at basic prices, 1961 to 2016 

This study examines some causes of the slowdown and subsequent tepid recovery in the Canadian manufacturing sector, by analyzing the performance of detailed manufacturing industries. It also compares the performance of Canada's manufacturing industries with that of manufacturing industries in the United States.

Weakness in Canada's durable goods industries has played a major role in the decline in Canada's manufacturing sector since 2000. This weakness was especially acute in the transportation equipment industry, and largely due to declines in motor vehicles and parts production. However, compared to the United States, the Canadian transportation equipment industry had a similar impact on growth in the manufacturing sector; therefore, this sector does not explain the relative differences in manufacturing output between the two countries.

Rather, the exceptional performance of the U.S. computer and electronics industry largely accounts for the relatively stronger performance of the U.S. durable goods sector throughout the 2000s, despite the information and communication technology collapse in 2001. Indeed, from 2000 to 2007, the U.S. computer and electronics industry was responsible for two-thirds of the 3.1% average annual growth in the U.S. manufacturing sector overall. This industry has been on an upward trend in the United States since then. A similar growth momentum was not observed in this or any other manufacturing industry in Canada.

In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.

In 1961, John Diefenbaker was Canada's Prime Minister, Wayne Gretzky was born in Brantford, Ontario, and John F. Kennedy was sworn in as America's 35th President. That same year, output from Canada's manufacturing sector accounted for nearly 30% of Canada's total output. Of this, the food, beverage and tobacco industry had the largest share (18.7%), followed by paper (10.2%) and primary metals (9.3%). Combined, these three industries accounted for 38.2% of all manufacturing output.

The industrial composition of Canada's manufacturing sector has changed considerably since the early 1960s. In 2013 (the latest detailed data available), output from the manufacturing sector had fallen to 14% of Canada's total output, less than half its contribution in 1961. The food, beverage and tobacco industry still had the greatest share of manufacturing output at 15.8%; however, the next two largest industries were transportation equipment (14.8%) and chemicals (9.9%). Together, these three industries accounted for 40.5% of the total manufacturing output for that year.

Products

The research article, "Real Growth of Canadian Manufacturing Since 2000," which is part of the Economic Insights series (Catalogue number11-626-X), is now available.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods or data quality of this release, contact Sean Clarke (613-796-9238; sean.clarke@canada.ca), Analytical Studies Branch, or Lydia Couture (613-951-5394; lydia.couture@canada.ca), Economic Analysis Division.