10.1 Concepts and definitions

10.4 Investment in inventories, commonly referred to as the value of physical change in inventories or as changes in inventories in the international system, includes the following:

  • changes in stocks of outputs that are still being held by the units that produced them prior to their being further processed, sold, delivered to other units or used in other ways;
  • changes in stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing; they are measured by the value of the entries into inventories less the value of withdrawals, less the value of any recurrent losses of goods held in inventories;1
  • changes in work in progress inventories.

10.5 In the Canadian System of National Accounts (CSNA), business inventory investment is subdivided into farm inventories and non-farm inventories. Estimates of business investment in farm inventories fall under three major headings: grain,2 other farm-held inventories,3 grain in commercial channels4 and livestock. Non-farm inventories are estimated at a very detailed level and are published for five main categories:

  • Manufacturing (durable and non-durable goods);
  • Retail trade (durable and non-durable goods);
  • Wholesale trade (durable and non-durable goods);
  • Non-monetary gold; and
  • Other non-farm inventories5.

10.6 Work in progress for uncompleted structures is not treated as part of inventories in the CSNA.

10.7 Manufacturing, retail trade, and wholesale trade comprise the major categories of non-farm inventories. The manufacturing industries encompass 23 categories of goods, while retail trade has 19 and wholesale trade, 16. Table 10.2 provides a complete list of these categories.

10.8 Aside from the classification of goods by category, inventories in the manufacturing industries can also be classified according to the product's state of development. First are finished goods, that is, the goods an industry produces. Next are goods purchased for resale, meaning goods purchased by the industry to be resold without any processing taking place. Third, there are goods in process,6 or goods that have not been completed and which must undergo further processing before they can be sold. Finally, raw materials include goods that a business owns and intends to use in the production of other goods. Raw materials include both the "nuts and bolts" and the goods used indirectly in production, such as fuel oil and paper for administrative purposes. Inventories of raw materials differ from gross fixed capital formation in that the goods are incorporated into the finished products rather than used7 in the production process. In addition, the goods in question are used during a relatively short period (generally less than a year).

10.9 All gold bullion, including that held by individuals, is included in gold inventories since it can be resold for use in the production process. Gold coins are excluded from inventories since they are considered to be finished products. The only gold coins included in inventories are those classified as goods in process that are produced by coin manufacturers. Monetary gold (a financial asset in the financial account) and gold held in Canada by non-residents are also excluded from inventories.

10.10 The last category is that of other non-farm inventories, which includes six categories of goods—logging, mining, finance and services, transportation and construction. For these goods, inventory estimates pertain to finished products only.

Presentation: Income and Expenditure Accounts and Input-Output Tables

10.11 The investment in inventories that appears in the Income and Expenditure Accounts (IEA) is not formally reconciled with the estimates that appear in the Input-Output Tables (IOT) for Canada, as is the case for all other GDP expenditure items.

10.12 This is because the IEA statistical discrepancy is implicitly included in the investment in inventories in the Input-Output Tables (Table 10.1).

Table 10.1 Investment in inventories in the Input-Output Tables and in the Income and Expenditure Accounts, 2000. Opens in a new browser window.

Table 10.1
Investment in inventories in the Input-Output Tables and in the Income and Expenditure Accounts, 2000

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Notes

1. This definition has been taken from the System of National Accounts 1993, paragraphs 10.7 and 10.28 and glossary, under changes in inventories.

2. Grain includes eight components: wheat, oats, barley, rye, flax, canola, soybeans and corn.

3. Other inventories have eight components: potatoes, tobacco, special crops, cattle, calves, hogs, sheep and lambs, and poultry.

4. Grain in commercial channels is grain held by the Canadian Wheat Board or by private traders.

5. Inventories of natural resources (minerals in the ground or forests), are not included in inventories of raw materials. Stocks of natural resources, such as timber and subsoil minerals, are included in the economy-wide measures of non-financial non-produced tangible assets in the National Balance Sheet Accounts (catalogue 13-214). These are not treated as inventories in the national accounts.

6. According to the System of National Accounts 1993, goods in process should include housing under construction (par. 10-102). However, in the Income and Expenditure Accounts, the latter are included with gross fixed capital formation in residential buildings (see Chapter 9).

7. This is referred to as "wear and tear", known as "depreciation of capital assets" or "rate of depreciation of fixed capital".