The 2004 to 2007 revisions of the Income and Expenditure Accounts
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- Revision schedule
- Impact of the revisions on gross domestic product (GDP)
- Revisions to income aggregates
- Revisions to expenditure aggregates at current prices
Revised estimates of the Income and Expenditure Accounts (IEA) covering the period 2004 to 2007 have been released along with those for the first quarter of 2008. These revised estimates incorporate the most current source data and seasonal patterns.
The annual revision process is integrated within the Canadian System of National Accounts, with revised estimates of the National Income and Expenditure Accounts (catalogue no. 13-001), Financial Flow Accounts (catalogue no. 13-014), and Canada's Balance of International Payments (catalogue no. 67-001), compiled and released together. For example, updated estimates of detailed financial transactions underlying gross domestic product (GDP)are harmonized with revised estimates of sector incomes and outlays. In addition, revised estimates of the National Balance Sheet Accounts (catalogue no. 13-214), are released about two weeks later, based largely on the updated sources of financial and capital transactions as well as on estimates of capital gains/losses implicit in the stock estimates.
The integration of GDP estimates by component occurs through compiling Input-Output Tables in current prices for the first two years of the four year revision period. These data are released in the fall of each year when the full provincial Input-Output Accounts are completed. Corresponding revisions to the monthly estimates of real gross domestic product by industry are released in September. Industry-based estimates are integrated annually, at the time of the first quarter with the income and expenditure based measures of GDP. Revisions to the more recent two years of the four year revision cycle arise due to updated sub-annual and annual sources of information.
Statistical revisions are carried out regularly in the Canadian System of National Accounts in order to incorporate the most current information from censuses, annual surveys, taxation statistics, public accounts, etc. In principle, the revision schedule for the IEA is as follows: the first estimate for a given quarter is released approximately 60 days after the end of the reference quarter; this estimate is revised when estimates for subsequent quarters of the same calendar year are released; thereafter, the estimates are open for revision only once a year for the next four years, at the time of the release of the first quarter estimates. For example, the estimates for the first quarter of 2004 were first released in May 2004. The first revision to these estimates occurred when the second quarter estimates were released in August 2004, further revisions occurred when the third and fourth quarter 2004 estimates were released. These estimates were revised again in each of the next four years, with the last of these revisions occurring with this release.
The policy of revising the estimates of previous years only once a year is adhered to throughout the System of National Accounts. The period open for revision, however, varies from one set of accounts to the other. Thus, the standard revision is four years in the Income and Expenditure Accounts and the Balance of Payments. The standard revision in the Input-Output Accounts covers one year—the first year of the four years of revision in the Income and Expenditure Accounts and the balance of payments statistics. The revision of the Financial Flow Accounts usually parallels that of the National Balance Sheet Accounts and may occasionally cover more than four years in order to harmonize the flows with the revised stocks.
Limited revisions are sometimes carried out for periods further back than four years and historical revisions are conducted periodically, roughly once every 10 years. Historical revisions provide an occasion to improve estimation methods, eliminate statistical breaks resulting from more limited revisions and introduce conceptual changes into the system. The most recent historical revision was completed in December 1997. Documentation related to this revision can be found at Historical revision of the National Economic and Financial Accounts: review.
The current revisions to GDP result from the inclusion of the most current estimates from data sources, including survey results, administrative data and public accounts. Revised 2004 and preliminary 2005 Input-Output data are incorporated for the first two years of the four-year revision period. New benchmark information is incorporated for the more recent periods. Other series are revised due to applying existing or updated projectors to the new levels received from the Input-Output Accounts. Additional conceptual or classification changes are sometimes implemented within the National Income and Expenditure Accounts. Documentation related to these conceptual changes can be found at Latest Developments in the Canadian Economic Accounts. No conceptual changes have been made to the Income and Expenditure Accounts this year.
As can be seen in Table 1, the revision results in minimal adjustment to the level of GDP at current prices on an annual basis for 2004. The estimates are revised down by $2.5 billion for 2005 while they are adjusted up by $4.2 billion for 2006 and $4.2 billion for 2007. The minor revision of $78 million to GDP in 2004 is a result of revisions to the 2004 Input-Output Tables. This is the last time 2004 will be revised in a normal revision schedule as it is now fully reconciled with the final Input-Output Accounts. Chart 1 compares the value of the previous estimate to the revised estimate of nominal GDP on a quarterly basis.
Chart 1 Gross domestic product
The downward revision to GDP in 2005 is mainly driven by lower corporate profits and government current expenditure than previously estimated. The upward revisions to GDP in 2006 and 2007 are primarily due to higher labour income and investment in machinery and equipment, which are only partly offset by lower corporate profits, government current expenditures, business investment in non-residential structures, and exports of goods and services. The upward revision to labour income stems from the incorporation of employment income data (T4 records) from Canada Revenue Agency, whereas the upward revision to business investment in machinery and equipment is due to revised information from the survey of Public and Private Investment in Canada. On a quarterly basis (Table 3), revisions are small in 2004 while GDP is revised down in all quarters of 2005. In contrast, the level of current dollar GDP is revised up for all quarters of 2006 and 2007.
The current revision to the annual growth rate of current dollar GDP (Table 4) has left 2004 and 2007 unchanged. Viewed from a historical perspective over two decades, the revision of -0.2 percentage points in 2005 falls in the low range of revisions while it reaches 0.5 percentage points in 2006. The cumulative revision to the growth rate is measured by taking the difference between the current growth rate and the initial growth rate. The estimate of growth remains unchanged in 2007 and is revised up by 0.3 percentage points in 2004, 0.2 percentage points in 2005, and 0.8 percentage points in 2006, respectively. The cumulative revision to the 2006 growth rate is large by historical standards. The estimates of quarterly GDP growth remain practically unchanged for all quarters of 2004. There are only minor revisions of +/-0.2 percentage points for some quarters of 2005 through 2007. Also, the cumulative revision is generally minor for most quarters of the 4-year period, with the largest portion of the revisions taking place in the first (+0.8 percentage points) and second quarters (+0.7 percentage points) of 2006.
The estimates of annual real GDP growth (Table 4) are unchanged for 2004 and 2007. They are revised down 0.2 percentage points in 2005 but up 0.3 percentage points in 2006. The cumulative revisions to the growth rate are zero for 2005 and 2007. They are modest by historical standards for 2004 and 2006, settling at 0.3 percentage points and 0.4 percentage points, respectively. On a quarterly basis for current revisions, 2004 and 2007 remain practically unchanged. Fairly small revisions of +/-0.2 percentage points are applied to some quarters of 2005 and 2006. The cumulative revisions are small for most quarters of the period except the third (+0.3 percentage points) and fourth (+0.3 percentage points) quarters of 2004 and the first (-0.4 percentage points) and fourth +0.5 percentage points) quarters of 2005.
Chart 2 Growth rates of real GDP, annual
Chart 3 Growth rates of real GDP, quarterly
Table 2 provides a history of the revisions to GDP for the period 1994-2007. As noted earlier, each annual estimate is subjected to four different annual revision cycles as well as periodic historical revision processes. This table provides the published level and growth rate of GDP for a given year for each of these revision cycles. The largest revisions to GDP normally occur with the third revision cycle, in which the Income and Expenditure Accounts are benchmarked to the preliminary Input-Output Tables. The average upward revision to GDP growth is 0.3 percentage points and the average downward revision is -0.3 percentage points following the first revision cycle. This changes to +0.6 percentage points and -0.4 percentage points with the second, and +0.7 percentage points and -0.3 percentage points with the Input-Output benchmarking process (the third and fourth revision cycle combined).
The implicit chained price index for GDP in 2004 and 2007 remains unchanged. The index is slightly revised down 0.1 percentage points for 2005 and up 0.1 percentage points for 2006.
Estimates of wages, salaries and supplementary labour income are revised upward by $2.3 billion, $1.1 billion, $5.9 billion and $6.1 billion in 2004 through 2007, respectively. The revision in 2004 is due to an updated 2004 T4 supplementary tax file received from the Canada Revenue Agency (CRA). This revision also affected 2005, as both files have now been incorporated into the estimate of wages and salaries. Revisions in 2006 are the result of the incorporation of data from tax files as well as other benchmark sources. Supplementary labour income is revised with actual data on contributions to pensions available for 2006.
Within the System of National Accounts, surplus is defined as the income corporations obtain from their own production facilities — value added at basic prices less compensation of employees less taxes on production payable plus subsidies received. It represents the last balancing item in the Input-Output Tables and is calculated for each industry. As part of the annual benchmarking to the Input-Output Tables, estimates of surplus are produced by incorporating the latest annual business and institutional surveys as well as various administrative data into the Input-Output framework. Once these benchmark estimates of surplus are derived, the revisions are incorporated into the Income and Expenditure Accounts. In the Income and Expenditure Accounts, surplus includes the following income components: corporation profits before taxes, interest and miscellaneous investment income, government business enterprise profits before taxes, inventory valuation adjustment, and capital consumption allowances. Surplus is revised downward by $1.7 billion for 2004 and by $2.9 billion for 2005. It is revised up by $0.4 billion in 2006 and down by $2.6 billion in 2007. Part of the downward revision to surplus reflects updated information on purchases of intermediate inputs by the automobile industry. The revised source data extend back prior to the four-year window open for the revision under the revision policy of the SNA Branch. To minimise the impact on the time series, the revision was introduced gradually over the 2004 to 2006 period. Table 1 shows the revisions to surplus for 2004 to 2007 as well as how the revision is distributed among its various income components.
Estimates of corporation profits before taxes are revised down each year from 2004 through 2007 by $0.9 billion, $3.5 billion, $2.1 billion and $7.2 billion, respectively. The revisions in 2004 and 2005 reflect the benchmarking to the Input-Output Accounts that take into account the latest annual business survey data as well as updated annual corporate income tax returns for 2005. New estimates from the preliminary Financial and Taxation Statistics for Enterprises including the General Index of Financial Information (GIFI) schedules and other annual sources have been incorporated for 2006. The 2007 estimates are projected using revised estimates from the Quarterly Financial Statistics for Enterprises. Government business enterprise profits are revised down by $0.1 billion (2004) and up by $0.7 billion (2005), $0.8 billion (2006) and $0.1 billion (2007). Interest and miscellaneous investment income is virtually unchanged in 2004, but is revised upward by $0.2 billion, $1.1 billion, and $2.8 billion for 2005, 2006 and 2007, respectively. Revisions to this series reflect new and revised interest payment and receipt information from businesses. Capital consumption allowances (CCA) are revised downward in the first two years ($0.5 billion and $0.4 billion) but upward in the other two years ($0.5 billion and $1.4 billion). Updated annual corporate income tax returns, together with additional depreciation estimates from the Investment and Capital Stock Division's perpetual inventory model have led to these revisions. Inventory valuation adjustment sees minimal changes in 2004 and 2005. The current revision is -$0.6 billion for 2006, and +$0.3 billion for 2007.
Accrued net income of farm operators from farm production is revised downward in all four years due mainly to revisions in accrued program payments, farm operating expenses and grain inventories held on farms. Accrued net farm income remained at a low level in 2006 and 2007, compared to its historical level. Net income of non-farm unincorporated business, including rent is revised slightly upwards in all four years. The revisions in 2004 and 2005 reflect the annual benchmarking to the Input-Output Accounts by industry. The revisions in 2006 incorporate the most recent tax data from Canada Revenue Agency.
The estimate of taxes on factors of production, less subsidies is unchanged in 2005 and is revised slightly upward in 2004 and 2006. In 2007 the estimate is revised upward by $1.0 billion. Taxes on products, less subsidies are revised downward in 2004 through 2007. Revisions to both series incorporate new public accounts and other financial information for the different government sub-sectors.
Personal expenditure on consumer goods and services is revised downward by $0.5 billion (2004), $1.5 billion (2005), $0.2 billion (2006), and $1.2 billion (2007), with food and non-alcoholic beverages accounting for the majority of the revisions. There were upward revisions throughout the 4-year period on spending on natural gas and communications. In 2004 and 2005, revisions reflect benchmarking to Input-Output Accounts. Personal expenditure on services is revised using results from the Survey of Household Spending for 2006, as well as surveys of service industries. Both the quarterly retail commodity data, up to 2007, and the annual Retail Trade for 2006, released in March 2008, are incorporated into the personal expenditure estimates on consumer goods.
The downward revisions to Government current expenditure on goods and services are relatively large, accounting for $1.5 billion in 2004, $2.5 billion in 2005, $0.9 billion in 2006, and $1.6 billion in 2007. These revisions reflect new data from the federal government's accounting system and provincial public accounts as well as the latest local government information. Survey results for 2005 from the Canadian Institute for Health Information (CIHI) and the Culture, Tourism and the Centre for Education Statistics are also incorporated and carried forward to 2007. Government gross fixed capital formation sees modest revisions for 2004 to 2006 and a $2.0 billion revision in 2007. There is no revision to government investment in inventory.
Current dollar business investment in residential structures shows very small revisions for each year. Revisions are based on administrative data and results from the 2006 Survey of Household Spending and the Survey of Real Estate Agents and Brokers. Business investment in non-residential construction posts downward revisions for 2004 to 2007, with a larger revision of $3.9 billion in 2007. Business investment in machinery and equipment records upward revisions in all years at $0.3 billion, $2.4 billion, $6.1 billion, and $7.8 billion, respectively. Revisions to both series reflect benchmarking to the Input-Output Accounts as well as the incorporation of the latest estimates from the Private and Public Investment Survey. The sharp decrease in investment in non-residential structures in 2007 was largely due to revised estimates of engineering.
Revisions to business investment in inventories reflect the incorporation of new information on natural gas storage movements as well as information coming from the latest annual surveys. The downward revisions to 2004 ($0.4 billion) and 2005 ($0.3 billion) also reflect the results of the commodity balancing process that is integral to the compilation of the Input-Output Accounts, to which the Income and Expenditure Accounts are benchmarked. The upward revisions are recorded at $0.3 billion for 2006 and $2.7 billion for 2007.
Merchandise exports in current dollars are revised down by $1.6 billion, $2.0 billion and $2.2 billion over the period of 2005 to 2007, primarily driven by the revisions to machinery and equipment. The revision in 2004 is minimal. The downward revision to exports is largely due to the partial reversal of adjustments that had been made to account for underreporting of exports to non-US destinations. The partial reversal is based on evidence of improved reporting compliance by exporters. Merchandise imports in current dollars recorded limited downward revisions by $0.2 billion, $0.5 billion, $0.1 billion and $0.6 billion, respectively. In real terms, merchandise imports were revised down for the entire 2004 to 2007 period reflecting an upward adjustment to import prices. The adjustment was based on an analysis of imbalances between supply and use of goods in real terms. The revisions to service exports and imports are primarily caused by the incorporation of newly received survey data for Canada's trade in commercial services. The value of service exports is revised up by $0.7 billion and $0.2 billion for 2004 and 2005 but down by $0.05 billion and $0.4 billion for 2006 and 2007, respectively. Similar to exports, the value of service imports demonstrates modest revisions. The revisions to chained implicit prices are minimal for exports while they show some volatility for imports.
- Selected components, current revisions
- Revisions to gross domestic product, historical perspective
- Revisions to gross domestic product
- Revisions to gross domestic product (growth rates)
- Revisions to income aggregates at current prices
- Revisions to expenditure aggregates at current prices
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