Income and Expenditure Accounts Technical Series
The Natural Resources Satellite Account – Sources and methods

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by Marco Provenzano and Conrad Barber-Dueck

Release date: June 19, 2017

Special thanks goes out to Paola Ansieta, Jack Wang, Joseph Floyd, Mingyu Yu and Henry Robertson for their work on the development of the Natural Resources Satellite Account. Thanks also goes out to Monique Deschambault, Shuhua Gao, Kim Longtin, Rob Puchyr and Julie Smith for their technical support and advice.

1 Overview

The natural resources sector is an important part of the Canadian economic landscape. It plays a significant role in Canada’s economic growth, employment and investment. The development of new mines, energy sources, oil and gas reserves, as well as forest products, have led to the sector’s increasingly important role in Canada’s overall economic development. The sector is often an important driver of economic growth and is a key influence on regional economic performance. Given the importance of this sector, policymakers, researchers, businesses and households require comprehensive and timely statistics in order to assess the evolution, structure, role and contribution of this sector to the Canadian economy.

The Natural Resources Satellite Account (NRSA) is an expandable framework that can be used to present Statistics Canada’s existing data holdings for the natural resource sector as well as provide increased detail for data users. This paper examines the data sources and methodology used in creating the NRSA.

Sections 2 and 3 provide overviews of both the Canadian System of National Accounts (CSNA) and Satellite Accounting. Section 4 defines natural resources in the context of the NRSA. Sections 5 and 6 present the annual and quarterly methodologies respectively.

2 The Canadian System of National Accounts

The foundation of the NRSA is the data contained within the CSNA. The CSNA is based on the 2008 System of National Accounts (2008 SNA), an internationally recognized framework used to measure economic activity within a country or region. The framework is used by countries throughout the world to record their production, incomes, investment, consumption, financial transactions and stocks of assets and liabilities. The data are organized into a sequence of accounts that articulate the change in wealth from one period to another by tracking the activities of economic agents (households, governments, corporations). The SNA provides a set of concepts, classifications and accounting rules for compiling and integrating data to give a comprehensive picture of the economy and how it works. Key measures that emerge from this framework include gross domestic product (GDP) at both basic and market prices, household disposable income, investment, capital stock, productivity, the balance of international payments and government debt.

The annual supply and use tables (SUT), formerly known as the input-output tables (IOT), produced by Statistics Canada, are the main source of information used to derive the annual NRSA estimates. These tables balance the total supply of all products in the economy with their uses. By definition, total supply must equal total demand for each product. The supply of a product can originate from domestic production or imports and is expressed in market prices (the price paid by the final consumer of the good); including margins for transport, trade, sales tax and tariffs. The various uses of a product include the utilization by businesses for the production of other goods or services (intermediate consumption), along with final consumption by households, government or non-profit institutions. Further, the product could be purchased as an asset for ongoing use in the production of other products (investment or gross fixed capital formation) or it can be exported.

At Statistics Canada, industries are defined by the North American Industry Classification System (NAICS); similarly, all products are catalogued by the North American Product Classification System (NAPCS). These classification systems are the building blocks for constructing the SUT, which in turn combines and modifies some of these industries and products. These are then called the Input Output Industry Classification (IOIC) and the Supply Use Product Classification (SUPC), formerly the Input Output Commodity Classification (IOCC).

Estimates of GDP can be calculated in three separate ways using the SUT: by production, by incomes and by final expenditures. These different calculations of GDP fit into the SNA sequence of accounts that begin with total output (production) and continue to articulate primary incomes generated in productive activity and final expenditures.

The production method expresses who produces the natural resource products and how they are produced. Estimates are calculated using the total output of the natural resource economy less its intermediate inputs. Output is the production of goods and services by the sector. Intermediate consumption refers to the goods and services the sector uses as material inputs into the production process. Other inputs include labour and capital.

The income method considers the generation of income. It sums all income originating from natural resource production, including both the return to capital (operating surplus) and labour (compensation of employees). In the case of unincorporated businesses, the return to capital and labour cannot be separated and therefore their income is referred to as mixed income. Taxes less subsidies on products and production are also included in this method, as they are part of the valuation of production at market prices.

The expenditure method sums all final expenditure on natural resources in the economy. These expenditures include final consumption of households, government and non-profit institutions. They also include investment in capital (gross fixed capital formation) and the change in inventory levels. Exports of natural resources minus any imports of inputs into the production process complete the calculation.

In the SUT, these GDP estimates, along with other data, are calculated in nominal terms. The effect of prices can also be removed so that the volume of economic activity can be observed.

3 Satellite accounts

One of the strengths of the CSNA lies within its flexibility. While the system lays out the concepts, accounts and accounting rigour required to produce a set of integrated and internally consistent set of accounts, it does afford the compiler the flexibility to vary and, in a sense, expand the framework to address a specific need. At the limit, this expansion is referred to as satellite accounting. There are essentially two types of satellite accounts that can be produced. One type of satellite account involves a rearrangement of the classifications or data (e.g., more detailed alternative aggregations) and possible addition of complementary information of the existing core accounts. These satellite accounts do not change the underlying concepts of the core CSNA but provide an expanded perspective on a particular sector, group of products or activity.Note 1 The second type of satellite account seeks to expand or supplement the underlying concepts of the core CSNA to study a topic of social interest. This could involve, for example, expanding the concept of production (e.g., including volunteer activities as production), consumption or capital formation. The NRSA falls into the first category, where concepts are consistent with the core CSNA, but additional detail and presentational changes are used to better identify and articulate the natural resource sector.

The development of the NRSA involves extracting detail related to natural resource activities from the core set of published CSNA data. The account follows the main principles, classifications and definitions of the core CSNA, ensuring it is directly comparable with the rest of the CSNA. From this account, therefore, it is possible to calculate a GDP for the natural resource sector comparable to total GDP—providing a measure of the sector’s contribution to total economic activity. By using the same principles as those in the CSNA, the satellite account leverages an internationally accepted statistical framework and infrastructure. Examples of other macroeconomic aggregates directly comparable to the core framework include international exports and imports, gross fixed capital formation (investment), domestic demand and employment.

In addition to comparability and efficiency, the use of the CSNA infrastructure also provides a number of other advantages. A large array of data is already available at Statistics Canada to construct standard macroeconomic accounts and can be used as the starting point in the construction of the NRSA. The data has already gone through data quality validation and have been further integrated, reconciled and balanced in the process of producing the CSNA. This ensures that the data underlying the satellite account is equivalent in quality to Canada’s core macroeconomic accounts.

The NRSA also provides a clear organizing framework for analysis of the natural resource sector. It clearly defines the sector and thereby presents a consistent set of numbers rather than a variety of estimates based on inconsistent concepts. The account goes beyond an industry perspective of the natural resource sector, rather using natural resource activities as its main organizing structure. As a result, the NRSA will eliminate industry production unrelated to natural resources and add in natural resource production that takes place in industries that aren’t traditionally defined as natural resources (such as the production of refined precious metals in the miscellaneous manufacturing industry and the production of fuel wood in the agricultural crop industry).

4 Defining natural resources

The first step in creating the NRSA is to clearly define natural resource activity and to develop the corresponding classification systems. In doing so, two important factors to consider are:

  • Does the definition align with international standards?
  • Does the account serve the needs of users for policy or business decisions?

4.1 International definitions

It is important that the NRSA follows international standards to ensure data are not only comparable with the Canadian accounts but also internationally, as much as possible. Two key international definitions of natural resources come from the Organization for Economic Cooperation and Development (OECD) and The System of Environmental-Economic Accounting 2012—Central Framework (SEEA), the internationally accepted economic-environment accounting framework.

The OECD defines natural resources as: “Naturally occurring assets that provide benefits through the provision of raw materials and energy used in economic activity (or that may provide such benefits one day) and that are subject primarily to quantitative depletion through human use.”Note 2

The SEEA defines natural resources as including “… all natural biological resources (including timber and aquatic resources), mineral and energy resources, soil resources and water resources. All cultivated biological resources and land are excluded from scope.”Note 3

Moreover, the definition of energy is taken from Statistics Canada’s Energy Statistics Framework that is based on the International Recommendations for Energy Statistics (IRES) established by the United Nations Statistical DivisionNote 4. These frameworks follow the definitions above while more precisely defining the energy sub-sector, for example, treating all products produced within petroleum refineries to be energy, this includes such products as petrochemicals and asphalt.

4.2 Natural resources satellite account definition

With these definitions in mind, the NRSA defines natural resource activities as those which result in goods and services originating from naturally-occurring assets used in economic activity. These assets comprise mineral and energy resources, water, as well as natural timber, aquatic, and other natural biological resources, and may be renewable or non-renewable. As per international standards, they do not include intensively cultivated biological resources such as agricultural crops.Note 5 To provide a more complete measure of the economic importance of the natural resource products, the services required in the extraction as well as the initial processing of natural resource inputs will be included. The activities related to the production of natural resource products constitute the scope of production for the NRSA.

In essence, the preceeding definition splits the scope of natural resource activity into three processes: the extraction of the natural resource inputs, the services required to undertake this extraction (such as transportation, distribution and scientific services), and the initial processing of the resulting natural resource products.

The NRSA further breaks the sector down into 4 sub-sectors, namely:

  • energy sub-sector;
  • forest sub-sector;
  • mineral and mining sub-sector and;
  • hunting, fishing and water sub-sector.

4.3 Natural resource products

Using the above definition, the economic activities defined as being natural resource-related can be mapped out. This can be done from both a product and industry perspective. For products, the starting point is the SUT product classification, as these tables contain all the goods and services produced in the Canadian economy. The product classification structure is based on NAPCS.

4.3.1 Extractive natural resource products

From a product perspective, given the criteria to exclude intensely-cultivated biological resources, agricultural products such as crop or livestock production would not be included in the account, nor would aquaculture products (fish farms), fur farming or tree farmsNote 6. Commercial fishing from the ocean or inland lakes would be included, as would products from hunting and trapping, as well as goods produced from forestry and mining. The extraction of energy from natural resources (such as water, wind, solar, crude oil, and gas) would also be included. These products would constitute the natural inputs (extraction) portion of the account (see table 1).

4.3.2 Natural resource service products

As part of the process of extracting natural resource inputs, some service products are required that would not be produced in the economy without the extraction activity. As a result, they are included in the sector to provide a more complete picture of the size of the natural resource activity in the economy. Services related to the extraction or discovery and development of natural resources are included in this category, as well as any transportation of the natural resource product to the location of processing. As such, mineral exploration as well as pipeline transportation would be included as service products in this category. The transportation services provided in the forest and mining sub-sectors for the delivery of goods to the initial processing location (e.g., trucking and rail) should also be included as natural resource activities, but data for this service is not separately available at this time (see table 1). As data becomes available, this category will be included.Note 7 Services related to research and development as well as legal, scientific and technical services are included, as are all other services that are required to create the product. Housing and accommodation services are excluded as they would exist regardless of the existence of the sector.

4.3.3 Initial processing products (primary manufacturing)

Similar to the case of natural resource service products, the initial processing of natural resource inputs, for the most part, would not be found in the economy without their initial extraction.Note 8 As a result, the initial processing of natural resources is a clear extension of the extraction industry and is therefore included within the natural resource sector. These products are often classified as manufactured goods within the SUT framework since the processes physically transform inputs. As a practical implementation rule, manufacturing activity will only be included in the natural resource sector if over 50% of the material inputs into the production process are natural resource inputs (4.3.1).Note 9

Initially, natural resources inputs such as logs and crude oil are identified. Secondly, each industry within the SUT framework is examined to determine if it meets the 50% criteria in its production process; these could be thought of as the “main” natural resource industries, although natural resource activity could also take place in other industries. As a final step, all products processed primarily in these industries are deemed to be natural resource products. The NRSA captures the production of these products regardless of whether they take place in the main natural resource industries or outside of them (see table 3 for a list of specific natural resource industries)Note 10.

This definition results in the inclusion of manufacturing activities such as sawmill activity and the refining of ores and oil in the NRSA. Further downstream processes using the refined products, for example, wood furniture and manufactured metal products, are not in scope for the core NRSA, but are presented in a supplementary “downstream” table (see table 1 and 2).

With advances in technology, new natural resource products are being developed and new uses are being found for traditional by-products or waste products from natural resource product manufacturing. For example, lignin was once considered a by-product of producing pulp and is now being used as an important building block for bio-products. Unfortunately, data on lignin and other new natural resource products are not easily accessible at this time. It is not known where in the NAICS or NAPCS they have been included; although included in the scope of the NRSA, they have not been included in the estimates as reliable data currently does not exist within Statistics Canada. Going forward, attempts will be made to fully capture these activities as new data sources become available. The Cleantech Satellite Account (CTSA), which is currently under development, will likely be used to fill in some of these gaps. Once estimates are available, they will be incorporated into the NRSA.

4.3.4 Downstream activities (secondary and tertiary production)

Although not part of the core account, natural resources have important downstream effects on other sectors. These products fall outside of the definition of the natural resources sector but are nonetheless important in understanding the role of natural resources in the Canadian economy. They include such items as iron pipes, copper and aluminium tubing, cutlery, wood and kitchen cabinets. Measurements have been made for these activities which are presented in a downstream supplement to the NRSA account. In general, secondary production uses a large portion of primary manufactured products as inputs. These secondary products are then used in the production processes of tertiary products. The economic contribution of these products are calculated at the request of Natural Resources Canada. These products, however, are not part of Statistics Canada’s main natural resources calculations.

4.4 Natural resource industries

Within the industry classifications of the SUT, there is no single industry that comprises all natural resource activities, rather, the economic activity attributable to natural resources is found in many industries. For the purposes of the satellite account, natural resource industries can be defined as those in which more than half of the total output originates from the production of primary natural resource inputs as described in section 4.3.1. It also includes industries in which at least half of the material inputs in the production process are natural resource inputs. For example, the logging industry chiefly produces SUPC commodity MPG113001 – Logs, a natural resource commodity and therefore is a natural resources industry. The main products derived from these industries are then considered natural resource products (4.3). Downstream industries are those in which 50% of material inputs are either primary or secondary manufactured products.

It is important to note that only the activity within an industry that is attributable to natural resource product production is included in the NRSA. Therefore, if the forest industry produces both logs and provides housing for its employees, only the natural resource activity (production of logs) will be included.

Further, some non-natural resource industries may produce natural resource products. This economic activity is also included in the account. For example, an agriculture chemical manufacturer may produce some electricity internally as part of their primary production process. Although the manufacturer’s total output would not be included in the energy sub-sector, its production of electricity would. Another example concerns the production of refined precious metals in the "other miscellaneous manufacturing" industry; this production would be included in the mineral and mining sub-sector. Other outputs from the miscellaneous manufacturing industry, such as sporting and athletic goods, will be excluded. An example of this, using electricity GDP, is presented in table 4.

In this way, the NRSA goes beyond a simple industry perspective of natural resources and seeks to accurately identify natural resource activities within the Canadian economy.

4.5 Natural resource sub-sectors

The natural resource sector will be split into four distinct sub-sectors: forest, energy, minerals and mining, as well as hunting, fishing and water. SNA and NRSA concepts will be applied consistently across the four sub-sectors, with the aggregation forming the total natural resources sector. The sub-sectors are each a cross-section of products and industries (see table 1). For example, the forest sub-sector includes the natural inputs, services and processing products related to forestry, this activity occurs across several IOIC industries.

One complication of the sector presentation is that in some cases products and industries may be classified to more than one sub-sector. The three chief examples in the NRSA are coal and uranium mining that are included in the energy and mining sub-sectors, as well as the extraction of fuel wood, in both the energy and forest sub-sectors. Under Statistics Canada’s SUT classification systems, fuel wood is considered an energy product, which is primarily produced within the forest-related industries. Similarly, coal and uranium are considered energy products produced in mining industries. For the purposes of aggregation, each of these products will be assigned to sub-sectors based on their industry classification. That is to say, fuel wood will primarily be considered part of the Forest sub-sector and coal and uranium will be primarily considered part of the mineral and mining sub-sector. In order to accommodate the cross-cutting nature of these activities, the tables in the NRSA present the energy sub-sector both with and without these specific products.

5 Creating the annual estimates

The NRSA provides both quarterly and annual estimates of economic activity attributable to natural resources in Canada. Annual estimates, which are presented in this section, are created first. Section 6 reviews the quarterly methodology and how those estimates link to their annual counterparts. In creating annual data, extended use is made of Statistics Canada’s SUT.

5.1 The Canadian system of national accounts and the supply-use tables

The NRSA estimates rely heavily on the SUT of the CSNA. These tables provide the most comprehensive and detailed economic data by product and by industry in the CSNA for benchmarked yearsNote 11. Their compilation involves the integration and the reconciliation of economic information from a wide array of survey and administrative data sources.Note 12

The SUT present three main tables, namely the Output, Input and Final Demand tables (see figure 1). Taken together, these tables show the production of goods and services, the generation of income from the production process, and the flows of goods and services through the economic system between producers and consumers.

The Output table is where the values of production of goods and services are recorded for each industry in the economy. In most cases, domestic production or output of an industry is simply its sales or shipments measured at producer prices. Estimates of the supply of natural resource products in the NRSA would come from this table.

The Input table is where the purchases of various product inputs into production are presented for each industry in the economy. This table also shows the costs of “primary inputs” to production, including labour income, income of unincorporated businesses, other operating surplus and net indirect taxes. The estimates of GDP due to natural resources are based on the data reported in this table.

Lastly, the Final Demand table shows expenditures on goods and services that are for final use (i.e., consumed, used as capital investment or exported). While all purchases by households (persons) and government are considered final consumption in the SNA, businesses make purchases both as intermediate and as final expenditure.

Two broad classifications are used in the SUT to specify both products and industries.Note 13 At the most detailed level 473 products and over 235 industries are specified.

Figure 1 The structure of the supply-use tables

Description for Figure 1

The supply-use tables (SUT) are presented in three main tables, namely the Output, Input and Final demand tables (see Figure 1). Taken together, these tables show the production of goods and services, the generation of income from the production process, and the flows of goods and services through the economic system between producers and consumers. The Output table is where the values of production of goods and services are recorded for each industry in the economy. In most cases, domestic production or output of an industry is simply its sales or shipments measured at producer prices. Estimates of the supply of natural resource products in the NRSA would come from this table. The Input table is where purchases of the various product inputs to production are presented for each industry in the economy. This table also shows the costs of “primary inputs” to production, including labour income, income of unincorporated businesses, other operating surplus and net indirect taxes. The estimates of GDP due to natural resources are based on the data reported in this table. Lastly, the Final demand table shows expenditures on goods and services that are for final use (i.e., consumed, used as capital investment or exported). While all purchases by households (persons) and government are considered final consumption in the SNA, businesses make purchases both as intermediate and as final expenditure.

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Box 1 Balancing industry and product accounts in the SUT

One of the most important accounting identities (or constraints) found in the SUT is that supply must equal demand for each product (each good or service). In other words, the sum of the expenditures on a particular product must equal the revenues generated from sales (taking into account exports and imports). Similarly, there is an additional constraint that each industry’s total output (revenues) must equal its total inputs (costs).

In practice, due to limitations of the statistical system, these identities are not always satisfied. For instance, data obtained from surveys or administrative sources provide different estimates for the same phenomenon, have different levels of quality, may contain reporting errors and may not provide complete coverage, and so on. Ensuring that the data jointly satisfy both of these accounting identities through an iterative process referred to as the balancing of industry and product accounts is an integral part of compiling the SUTs.

Certain rules of consistency are followed during this process. For example, in the balancing of the industry account, the ratios of GDP, surplus, mixed and labour income, indirect taxes and material, energy and service inputs to gross output are all checked for consistency for each industry. Balancing the product account entails a similar set of consistency checks. The balancing process overall is a rigorous test for coherency across all the data that goes into the SUT. With each iteration, data inconsistencies are revealed, the reasons for them are identified and corrective steps are taken to reconcile the data. Balanced supply-use estimates are produced three years after the reference period.

End of text box

5.2 Annual NRSA benchmarks

As a first step in creating the NRSA, benchmark annual data is compiled. The main source of data for these benchmarks are the detailed SUT presented in the previous section. From these SUT, a production and generation of income account, as well as an expenditure account and the associated GDP estimates, can be created for benchmarked years.

5.2.1 Production and generation of income accounts

The first accounts in the sequence of national accounts are the production and the generation of income accounts. The balancing entries of both these accounts will provide an estimate of GDP for the natural resource sector. The structures of the accounts are shown in table 5 and table 6.

5.2.2 Natural resource GDP vs. industry GDP

As shown in table 5, there is certain output produced by natural resource industries that wouldn’t be considered natural resource products. An example of this would be a forestry and logging company that manufactures its own saws. The production of logs by this company would be included in natural resource GDP while the production of saws would be included in the industry’s GDP but not in the industry’s natural resource GDP.

The opposite of this case would be non-natural resource industries, such as the automotive and textile manufacturing industries, that produce some natural resource output as part of their normal production processes (for example, by producing their own electricity). This output would also be included in the NRSA.

In order to calculate natural resource GDP, we must assume that the production function of the industry is the same for each product. In other words, we assume that both natural resource and non-natural resource products have the same inputs and they are used in the same proportions. This assumption is necessary because more detailed data is not available. Fortunately, the assumption has little impact on the estimates since, in most cases, natural resource products comprise over 95% of the total industry.

With this assumption in place, a natural resource output-to-total output ratio can be applied to both intermediate inputs and primary inputs. This, in turn, allows for the measurement of GDP for natural resource activity to be separated from non-natural resource activity for each industry in the Canadian economy.

Figure 2 Industry gross domestic product and natural resources gross domestic product

Desription for Figure 2

Industry 1 produces 5,100 dollars of output, of which 5,000 is natural resource output and 100 is non-natural resource output. In order to produce this output, 1,020 dollars of inputs are used. As such, the total gross domestic product of this industry is 5,100 dollars less 1,020 dollars for a total of 4,080. In order to calculate the natural resource GDP of this industry a "natural resources output-to-total output ratio is calculated. In this example, we take the natural resources output of 5,000 dollars and divide it by the industry's total output of 5,100. The output ratio for this industry is therefore approximately 98%. This ratio is applied to both input and GDP to arrive at the natural resources GDP of the industry (in this case, 1,020 times 0.98 equals approximately 1,000 of inputs into the natural resource production process and 4,080 times 0.98 equals approximately 4,000 of natural resources GDP).

This process of calculating both a production and income-based GDP is carried out for each industry and then aggregated up. By doing so, a calculation can be made for the production and income account along with a GDP estimate of each of the natural resource sub-sectors and for the economy-wide impact of natural resources (see table 7).

5.2.3 Expenditure-based GDP

When the SUT are presented on a product basis, an expenditure account can be created. This will yield a third estimate of GDP, namely expenditure-based GDP. Table 8 shows the structure of the expenditure account.

Expenditurebased GDP =Final demand+Inventory+ExportsImports  MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaaeaaaaaaaaa8 qacaWGfbGaamiEaiaadchacaWGLbGaamOBaiaadsgacaWGPbGaamiD aiaadwhacaWGYbGaamyzaiabgkHiTiaadkgacaWGHbGaam4Caiaadw gacaWGKbGaaiiOaiaadEeacaWGebGaamiuaiaacckacqGH9aqpcaWG gbGaamyAaiaad6gacaWGHbGaamiBaiaacckacaWGKbGaamyzaiaad2 gacaWGHbGaamOBaiaadsgacqGHRaWkcaWGjbGaamOBaiaadAhacaWG LbGaamOBaiaadshacaWGVbGaamOCaiaadMhacqGHRaWkcaWGfbGaam iEaiaadchacaWGVbGaamOCaiaadshacaWGZbGaeyOeI0Iaamysaiaa d2gacaWGWbGaam4BaiaadkhacaWG0bGaam4Caiaacckaaaa@703E@

5.2.4 Expenditure adjustments

In theory, GDP derived from all three approaches should be identical. In practice, some adjustments must be made to the data to ensure this identity. Final demand adjustment

The production of natural resource products are used as inputs into the production process of many non-natural resource final outputs, such as cars and other manufactured final products. In order to get a full measure of expenditure on natural resource products, part of the expenditure on these other commodities must be included. In practice, this is done by treating the intermediate inputs to non-natural resource industries as flows leaving the sector, which is similar to final demand or exports (see table 9). Input adjustment

The production process for natural resources includes inputs that come from outside of the sector. For example, the process of extracting resources from the ground requires various machines and different types of gases and chemicals. These inputs, since they originate from outside of the natural resource “economy”, are treated similarly to imports in the production process. As a result, they are removed from the expenditure based-GDP calculation. This is the exact opposite of the final demand adjustment. Net adjustment

The net of these two adjustments are added to the expenditure GDP calculation to arrive at a natural resource GDP number consistent with the production and income approaches to calculating GDP.

Net expenditure embbedded in non-natural resource products = Expenditure adjustment - Input adjustment

This adjustment represents the net expenditure on non-natural resources products that are imbedded in natural resource GDP. Margins

The production and income-based GDP approaches measure economic activity at basic prices, while expenditure-based GDP is measured at market prices. In order to get all three GDP figures on the same basis, margins must either be removed from expenditures or added to production and income.

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Box 2 Basic prices versus market prices

Basic prices: The amount actually received by the producer from the purchaser for each unit of the good or service produced as output, before any taxes levied on products have been added and before any subsidies received on products have been subtracted. It also excludes any transportation or other margins that are invoiced separately by the producer.

Market prices / Purchasers’ prices: The actual costs incurred by users of the product. Purchasers' prices are measured after any taxes paid on products have been added and after any subsidies on products have been deducted. They include any transportation or other margins paid separately by the purchaser to take delivery of the product.

Note: for further detail, see User Guide: Canadian System of Macroeconomic Accounts, Chapter 4 Supply and Use Accounts.

End of text box Applying the adjustments

In order to ensure the identity that all three GDP measures must be equal, the adjustments presented previously are applied to expenditure-based GDP. Firstly, the "net expenditure on natural resource products embedded in non-natural resource products" is added to expenditures. The addition of this adjustment will yield an expenditure GDP at market prices consistent with the production and income approaches. Secondly, in order to get expenditure GDP on the same basis as production and income GDP, it is converted from market prices to basic prices. This is done by removing margins from the estimate (see table 10). Employment

Employment numbers are derived from the national accounts labour productivity dataNote 14. This dataset contains the number of jobs (both part time and full time) by detailed IOIC industry. In order to derive a natural resource employment number, the number of jobs in each industry is multiplied by the natural resource output ratio, which was previously derived.

Natural resource employmen t x  =Number of job s x   ×  Natural resource output rati o x MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaaeaaaaaaaaa8 qacaWGobGaamyyaiaadshacaWG1bGaamOCaiaadggacaWGSbGaaiiO aiaadkhacaWGLbGaam4Caiaad+gacaWG1bGaamOCaiaadogacaWGLb GaaiiOaiaadwgacaWGTbGaamiCaiaadYgacaWGVbGaamyEaiaad2ga caWGLbGaamOBaiaadshadaWgaaWcbaGaamiEaaqabaGccaGGGcGaey ypa0JaamOtaiaadwhacaWGTbGaamOyaiaadwgacaWGYbGaaiiOaiaa d+gacaWGMbGaaiiOaiaadQgacaWGVbGaamOyaiaadohadaWgaaWcba GaamiEaaqabaGccaGGGcGaaiiOaiabgEna0kaacckacaGGGcGaamOt aiaadggacaWG0bGaamyDaiaadkhacaWGHbGaamiBaiaacckacaWGYb GaamyzaiaadohacaWGVbGaamyDaiaadkhacaWGJbGaamyzaiaaccka caWGVbGaamyDaiaadshacaWGWbGaamyDaiaadshacaGGGcGaamOCai aadggacaWG0bGaamyAaiaad+gadaWgaaWcbaGaamiEaaqabaaaaa@85B1@
Total natural resource employment=  x=1 x ( Natural resource employmen t x ) MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaaeaaaaaaaaa8 qacaWGubGaam4BaiaadshacaWGHbGaamiBaiaacckacaWGUbGaamyy aiaadshacaWG1bGaamOCaiaadggacaWGSbGaaiiOaiaadkhacaWGLb Gaam4Caiaad+gacaWG1bGaamOCaiaadogacaWGLbGaaiiOaiaadwga caWGTbGaamiCaiaadYgacaWGVbGaamyEaiaad2gacaWGLbGaamOBai aadshacqGH9aqpcaGGGcWaaybCaeqal8aabaWdbiaadIhacqGH9aqp caaIXaaapaqaa8qacaWG4baan8aabaWdbiabggHiLdaakmaabmaapa qaa8qacaWGobGaamyyaiaadshacaWG1bGaamOCaiaadggacaWGSbGa aiiOaiaadkhacaWGLbGaam4Caiaad+gacaWG1bGaamOCaiaadogaca WGLbGaaiiOaiaadwgacaWGTbGaamiCaiaadYgacaWGVbGaamyEaiaa d2gacaWGLbGaamOBaiaadshapaWaaSbaaSqaa8qacaWG4baapaqaba aak8qacaGLOaGaayzkaaaaaa@7B43@

where x = {IOIC}

5.3 Current year estimates

The benchmark estimates, once created, are pushed forward to the most current year. This is done using a variety of data sources at a detailed commodity and industry level. Some of the main sources are presented in section 5.3.1 and 5.3.4. Balancing adjustments, as presented in box 1, are also applied at this stage.

5.3.1 Production account

In the production account, current year estimates need to be created for production, intermediate consumption and gross value added GDP.

Production estimates are derived from a variety of sources both internal and external to Statistics Canada. Energy data is derived mainly from supply-disposition tables for various commodities, pipeline statistics, and energy production statisticsNote 15 along with relevant price indices (such as the IPPI, CPI and RMPI).Note 16 Mining data mainly comes from Natural Resources Canada products and surveys,Note 17 while forestry data comes from various lumber and forestry surveys.Note 18 These estimates are confronted and reconciled with internal work done in the production of quarterly and annual GDP estimates.

GDP is derived from internal estimates of current year GDP growth rates by industry and commodity, as well as with monthly and annual industry GDP, while intermediate consumption is taken as a residual in order to balance the production account.

5.3.2 Generation of income account

The generation of income account variables are carried forward using estimates from national accounts labour productivity dataNote 19, surplus estimates from the national economic accounts as well as internal estimates. This data is then benchmarked to the GDP estimates derived in the production account.

5.3.3 Expenditure

Lastly, expenditure estimates are carried forward to current years. This is done at a detailed level for exports, imports, final demand, intermediate consumption and inventories. Trade data is derived from HS level customs data and from merchandise trade estimates published by Statistics CanadaNote 20. Final demand, intermediate consumption, inventories and margins are derived from internal estimates used in the production of quarterly and annual GDP.

5.3.4 Employment

Employment data is derived from labour productivity dataNote 21. Where data is missing from this source, it is supplemented using the survey of employment, payrolls and hours (SEPH)Note 22.

5.4 Adjusting the expenditure estimates for price

Including the expenditure-based GDP estimates comes with one very important feature, namely the ability to calculate constant dollar GDP estimates for each of the natural resource sub-sectors. This measure removes the effect of price changes (either inflation or deflation) from the estimates and leaves the volume of the product produced. For example, an oil producer may have earned $200 of revenue in consecutive years. This is a current (nominal) dollar estimate. However, the producer may have generated one hundred barrels of oil one year and two hundred the next. So, although the revenue stayed the same over the two years, the volume of their production would have doubled. GDP in constant dollars measures this second case and is a volume measure. Both calculations provide important economic information.

GDP values from the expenditure account are deflated using two main sources. Firstly, price indices (either CPI, RMPI or IPPI)Note 23 are used to deflate the GDP estimates for each sub-sector and commodity detail. Secondly, where possible, these estimate are compared to real GDP values by industry from the monthly GDP programNote 24.

6 Creating the quarterly estimates

Once the annual NRSA is complete, the quarterly series are created using the annual as a benchmark. This is done in two separate phases: firstly, the back periods are distributed on a quarterly basis and, secondly, the quarterly series for the back periods are pushed forward to the most recent quarter (published 90 days after the reference period). The quarterly data is not as detailed as the annual due to data limitations. The variables produced for this program are: production, GDP (nominal); exports, imports and employment.

6.1 Distribution of the annual data by quarter

The first step requires that the annual benchmarked data be distributed quarterly. In doing this, distributor series (on a quarterly basis) are obtained from various sources both internal and external to Statistics Canada (See table 12).

Once the series are obtained, they are benchmarked to the annual totals. This is done using a variation of the proportional Denton method as described in the IMF manual on national accountingNote 25. This will ensure that the quarterly series will have growth rates that match the indicator series as closely as possible while maintaining the constraint that the sum of the quarterly data for each year is equal to the annual benchmark totals. The formulation of the method is shown below (extra detail can also be found in the IMF SNA benchmarking guidelines). In practice, the benchmarking is done using in-house softwareNote 26

min ( x1xT ) t=2 T [ x t I t   x t1 I t1 ] 2    t{ 1, 4T } MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaWaaCbeaeaaqa aaaaaaaaWdbiGac2gacaGGPbGaaiOBaaWcpaqaa8qadaqadaWdaeaa peGaamiEaiaaigdacqGHMacVcaWG4bGaamivaaGaayjkaiaawMcaaa WdaeqaaOWdbmaawahabeWcpaqaa8qacaWG0bGaeyypa0JaaGOmaaWd aeaapeGaamivaaqdpaqaa8qacqGHris5aaGcdaWadaWdaeaapeWaaS aaa8aabaWdbiaadIhapaWaaSbaaSqaa8qacaWG0baapaqabaaakeaa peGaamysa8aadaWgaaWcbaWdbiaadshaa8aabeaaaaGcpeGaeyOeI0 IaaiiOamaalaaapaqaa8qacaWG4bWdamaaBaaaleaapeGaamiDaiab gkHiTiaaigdaa8aabeaaaOqaa8qacaWGjbWdamaaBaaaleaapeGaam iDaiabgkHiTiaaigdaa8aabeaaaaaak8qacaGLBbGaayzxaaWdamaa CaaaleqabaWdbiaaikdaaaGccaGGGcGaaiiOaiaacckacaWG0bGaey icI48aaiWaa8aabaWdbiaaigdacaGGSaGaaiiOaiabgAci8kaaisda caWGubaacaGL7bGaayzFaaaaaa@668C@
subject to:   ty x t =  A y   { y=1, T } MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaaeaaaaaaaaa8 qacaWGZbGaamyDaiaadkgacaWGQbGaamyzaiaadogacaWG0bGaaiiO aiaadshacaWGVbGaaiOoaiaacckacaGGGcWaaybuaeqal8aabaWdbi aadshacqGHiiIZcaWG5baabeqdpaqaa8qacqGHris5aaGccaWG4bWd amaaBaaaleaapeGaamiDaaWdaeqaaOWdbiabg2da9iaacckacaWGbb WdamaaBaaaleaapeGaamyEaaWdaeqaaOWdbiaacckacaGGGcWaaiWa a8aabaWdbiaadMhacqGH9aqpcaaIXaGaaiilaiaacckacqGHMacVca WGubaacaGL7bGaayzFaaaaaa@5B0D@

where t = Time (4y = Q4 of year y and 4y − 3 = Q1 of year y),

xt = Quarterly benchmarked series,

It = Indicator series,

Ay = Annual total for year y,

T = Last year of annual data

6.2 Current quarter estimates

The second step is to extend the quarterly data to the most recent periods using the same indicators from table 12. This is done using explicit forecasts based on the indictor series and will yield quarterly data that is available 90 days after the reference period.

x t unbenchmarked = x t1 × [ 1+  I t I t1 ] MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaaeaaaaaaaaa8 qacaWG4bWdamaaDaaaleaapeGaamiDaaWdaeaapeGaamyDaiaad6ga caWGIbGaamyzaiaad6gacaWGJbGaamiAaiaad2gacaWGHbGaamOCai aadUgacaWGLbGaamizaaaakiabg2da9iaadIhapaWaaSbaaSqaa8qa caWG0bGaeyOeI0IaaGymaaWdaeqaaOWdbiabgEna0kaacckadaWada WdaeaapeGaaGymaiabgUcaRiaacckadaWcaaWdaeaapeGaamysa8aa daWgaaWcbaWdbiaadshaa8aabeaaaOqaa8qacaWGjbWdamaaBaaale aapeGaamiDaiabgkHiTiaaigdaa8aabeaaaaaak8qacaGLBbGaayzx aaaaaa@580C@

where t = Time (quarterly),

Xt = Quarterly series,

It = Indicator series

Chart 1 Energy extraction gross domestic product (quarterly series versus annual benchmark), 2017 to 2015

Data table for Chart 1
Data table for Chart 1
Table summary
This table displays the results of Data table for Chart 1. The information is grouped by Year and quarters (appearing as row headers), Annual benchmark series and Quarterly indicator series (annualized), calculated using millions of dollars units of measure (appearing as column headers).
Year and quarters Annual benchmark series Quarterly indicator series (annualized)
millions of dollars
2007 Q1 87,812 72,014
Q2 87,812 75,007
Q3 87,812 92,339
Q4 87,812 111,887
2008 Q1 117,373 117,814
Q2 117,373 117,080
Q3 117,373 125,798
Q4 117,373 108,801
2009 Q1 63,896 77,654
Q2 63,896 64,151
Q3 63,896 56,714
Q4 63,896 57,064
2010 Q1 75,665 59,410
Q2 75,665 68,646
Q3 75,665 81,303
Q4 75,665 93,297
2011 Q1 89,785 84,138
Q2 89,785 99,418
Q3 89,785 93,788
Q4 89,785 81,801
2012 Q1 76,641 90,631
Q2 76,641 73,801
Q3 76,641 74,518
Q4 76,641 67,618
2013 Q1 85,715 76,408
Q2 85,715 76,747
Q3 85,715 92,170
Q4 85,715 97,536
2014 Q1 97,388 95,274
Q2 97,388 106,621
Q3 97,388 99,433
Q4 97,388 88,228
2015 Q1 65,535 73,278
Q2 65,535 65,803
Q3 65,535 65,242
Q4 65,535 57,817


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