The 2008 to 2010 revisions of the Income and Expenditure Accounts
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Revised estimates of the Income and Expenditure Accounts (IEA) covering the period 2008 to 2010 have been released along with those for the first quarter of 2011. These revised estimates incorporate the most current source data and seasonal patterns.
Statistical revisions are carried out regularly in the Canadian System of National Accounts (CSNA) in order to incorporate the most current information from censuses, annual surveys, administrative 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 three years,1 at the time of the release of the first-quarter estimates. For example, the estimates for the first quarter of 2008 were first released in May 2008. The first revision to these estimates occurred when the second-quarter estimates were released, in August 2008; further revisions were carried out when the estimates for the third and fourth quarters of 2008 were released. These IEA estimates were revised again in each of the next two years (2009, 2010), 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 CSNA. The period open for revision, however, varies from one set of accounts to the other. Thus, the standard revision is three years with respect to the Income and Expenditure Accounts and the Balance of International Payments. The Input-Output tables are not revised and cover the first year of the three years of revision of the Income and Expenditure Accounts and of 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 three years in order to allow for harmonizing the flows with the revised stocks.
The annual revision process is integrated within the CSNA, with revised estimates of the National Income and Expenditure Accounts, Financial Flow Accounts, and the Balance of International Payments, 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. Revised estimates of the National Balance Sheet Accounts are released about two weeks later; these are based largely on the updated sources of financial and capital transactions as well as on estimates of capital gains or 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 year of the three-year revision period. These data are released in the fall of each year when the full provincial Input-Output Tables are completed. Corresponding revisions to the monthly estimates of real GDP 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 last two years of the three-year revision cycle arise as a result of incorporating new or revised sub-annual and annual sources of information.
Limited revisions are sometimes carried out with respect to periods further back than three years, and historical revisions are conducted periodically, roughly once every 10 to 15 years. Historical revisions provide an opportunity to improve estimation methods and to introduce conceptual changes into the CSNA. 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. The next historically revised data are scheduled to be released in June 2012. For more information on the change to the revision cycle and on the CSNA historical revision, please consult Renewing the Canadian System of National Accounts.
Impact of the revisions on gross domestic product (GDP)
The current revisions to GDP reflect the most current estimates from data sources, including survey results, administrative data, and public accounts. Input-Output data are incorporated for the first year of the three-year revision period. New benchmark information is incorporated for the more recent periods. Other series are revised as a result of applying existing or updated projectors to the new levels received from the Input-Output Tables. 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.
Revisions to GDP
The real GDP annual growth rate was revised upward for 2008, downward for 2009 and upward again for 2010. The trend in the annual growth rate of GDP remained the same: there was a deceleration in 2008, a large contraction in 2009 followed by a large increase in 2010. Revisions to the annual growth rates of nominal GDP were less pronounced—revised up 0.2 percentage points in 2008, downward 0.1 percentage points in 2009 and unchanged in 2010.
Chart 1 Revisions to nominal GDP by year (current and previous)
Description for Chart 1
Chart 2 Revisions to real GDP by year (current and previous)
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Revisions to GDP for reference year 2008
The level of nominal GDP in 2008 was revised upward ($3.8 billion). The estimates for reference year 2008 represent the third time that the 2008 data have gone through the annual revision cycle. Revisions to various components of GDP can be significant at this time, as this represents the point in the revision cycle when the Income and Expenditure Accounts are benchmarked to the Input-Output Tables.
The overall revision to the 2008 level of GDP is normal in comparison to historical standards. The mean absolute revision to the level of nominal GDP from 2000 to 2007, between the second revision cycle and the third revision cycle, was $3.1 billion. This is slightly less than the $3.8 billion registered for 2008 during this revision cycle.
The growth in nominal GDP was revised upward by 0.2 percentage points. The growth in nominal GDP for 2008 has been revised upward with each new vintage of data released. The estimate at the time of the first annual revision was 4.4%, the second estimate was 4.6% and the final estimate, published with this annual revision, is 4.8%.
The growth in real GDP was similarly revised upward, by 0.2 percentage points, in line with the nominal growth rate. The initial estimate of the annual real GDP growth rate for 2008 was 0.4%, the latest and final estimate rests at 0.7%
On a quarterly basis, the trend in real GDP remained the same, with a decline in GDP in the first quarter, little change in the second and third quarter and a substantial decline in the fourth quarter.
Chart 3 Revisions to nominal GDP by quarter (current and previous)
Description for Chart 3
Revisions to GDP for reference year 2009
The level of GDP was revised upward by $1.7 billion in 2009. Given that the size of the upward revision in 2008 was larger than the upward revision in 2009, the rate of change in nominal GDP was revised downward by 0.1 percentage points.
The decline in real GDP, however, was revised downward by 0.3 percentage points. This is large by historical standards. On average, at this point in the revision cycle, the mean absolute revision (1993 to 2008) to real GDP is around 0.2 percentage points. The GDP deflator was revised significantly for 2009, mainly due to new methodologies and data sources used to construct import and export prices. For details on this new methodology please consult the paper Revisions to real export and import adjustments to account for exchange rate fluctuations.
The year 2009 marked the first time the Canadian economy contracted on an annual basis in over 15 years. It is evident that many of the sub-annual indicators that were used to construct the first estimate of GDP had difficulty picking up the depth of the 2009 contraction—particularly indicators for labour income and business investments—components that saw substantial revision over this period. This is especially apparent in the first quarter. The initial estimate of the real growth in GDP for the first quarter of 2009 was -1.4%. This was subsequently revised to -1.8% during the last annual revision and was revised downward again to -2.0% with this annual revision. The data will go through one more revision cycle when the data are benchmarked to the Input-Output Tables at this time next year.
The quarterly pattern remained similar to previously published estimates: substantial declines in GDP took place in the first two quarters of the year; an increase was registered in the third quarter; and strong growth was observed in the final quarter.
Chart 4 Revisions to real GDP by quarter (current and previous)
Description for Chart 4
Revisions to GDP for reference year 2010
The level of GDP was revised upward by $3.1 billion in 2010. The annual nominal GDP growth rate and the annual real GDP growth rate were each revised up 0.1 percentage points.
The quarterly pattern of the growth in real GDP for 2010 was virtually unchanged. The growth in real GDP was very strong in the first quarter, levelled off in the second and third quarters, with a pick up again in the fourth quarter.
The 0.1 percentage point revision to real GDP in 2010 is normal by historical standards. On average, at this point in the revision cycle, the mean absolute revision to real GDP (1993 to 2008) is 0.13 percentage points.
Revisions to income aggregates
Estimates of wages, salaries, and supplementary labour income were revised downward by $4.4 billion in 2009 and $2.5 billion in 2010. Estimates are unchanged for 2008. Revisions in 2009 reflect data from the T4 administrative data file as well as from other benchmark sources such as pension information.
In 2009, the majority of the $4.4 billion change stems from downwardly revised estimates of wages and salaries (revised downward by approximately $10 billion). This downward revision was offset by a large upward revision in supplementary labour income, specifically pension payments. With the downturn in the stock market in 2009, many firms had to make extra contributions to their defined benefit pension plans. These contributions are treated on a cash-basis within the CSNA, and included in current period labour income. The growth rate for wages, salaries, and supplementary labour income for 2009 was revised downward from 0.1% to -0.5%. This downward revision for 2009 was not entirely carried forward into 2010, and as a result, the 2010 growth rate was revised upward from 4.1% to 4.3%.
Within the CSNA, surplus is defined as the income that corporations and other institutions obtain from their own production activities—value added at basic prices, less compensation paid to employees, less taxes payable on production, 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 generated by incorporating data from 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 was revised upward by $4.7 billion for 2008. It was higher by $6.0 billion in 2009 and by a further $8.4 billion in 2010. The revision in 2008 was mostly a reflection of revised estimates in the finance, utility and mining industries originating in the Input-Output Tables. Table 1 shows the revisions to surplus for the period 2008 to 2010 as well as the distribution of the revision among its various income components.
Estimates of corporation profits before taxes were revised upward in 2008, 2009 and 2010. New estimates from the preliminary Financial and Taxation Statistics for Enterprises, including the T2 corporate tax returns, the General Index of Financial Information (GIFI) schedules and other annual sources, have been incorporated for 2009. The 2010 estimates are based on revised estimates from the Quarterly Financial Statistics for Enterprises.
Government business enterprise profits were revised in each of the three years of the revision cycle. The largest revision was that of 2009, where the estimates were revised upward by $2.0 billion. The revisions reflect new data originating from the income statements and balance sheets of government business enterprises.
The accrued net income of farm operators from farm production was virtually unchanged in 2008 and 2009. More substantial upward revisions were made for 2010. Revisions originate from the incorporation of revised estimates of farm cash receipts obtained from various Statistics Canada agriculture surveys as well as the incorporation of administrative data from Agriculture and Agri-Food Canada, the Canadian Wheat Board, and other marketing and regulatory boards. Revisions to farm operating expenses reflect the incorporation of the latest estimates from the Taxation Data Program.
Net income of non-farm unincorporated business was revised downward in 2009. The downward revision stems from the incorporation of estimates derived from the latest T1 (Individual Tax Return) administrative data files. This downward revision was carried forward into 2010. While the level was revised downward for 2010, there was little change in the growth rate (revised downward slightly from 6.2% to 5.6%).
Revisions to expenditure aggregates at current prices
Estimates of personal expenditure on consumer goods and services were revised upward by $0.3 billion in 2008, downward by $0.5 billion in 2009 and $0.8 billion in 2010. The revision for 2008 originated from the Input-Output Tables. The revisions to 2009 and 2010 reflect the revised estimates from the Quarterly Retail Commodity Survey, the Annual Retail Trade Survey, the Survey of Household Spending, the annual surveys of Service Industries and Transportation divisions, as well as Goods and Services Tax and other administrative data files.
Government current expenditure on goods and services estimates were revised upwards in all three years of the revision cycle. These revisions reflect new data from the federal government accounting system and provincial public accounts, as well as the annual health and education surveys.
Estimates of government gross fixed capital formation were revised downward in 2009; this was the second consecutive year the estimates were revised downward. The cumulative revision between the initial estimate and the latest estimate was -$3.4 billion. The downward revision in 2009 was not carried forward into 2010, significantly changing the growth rate between 2009 and 2010. Prior to this revision, the growth in nominal government fixed capital formation was 13.9%, with this revision it rests at 17.8%.
Business gross fixed capital formation was revised upward by $1.0 billion in 2008, downward by $0.5 billion in 2009 and upward by $1.8 billion in 2010. While the revision for 2009 was small, the mix of investment changed. Investment in non-residential structures was revised downward by $2.7 billion. Most of this was offset by an upward revision in business investment in machinery and equipment ($1.0 billion) as well as an upward revision in investment in residential structures. Overall, the growth in business gross fixed capital formation remained virtually unchanged at +15%. The downward revision to investment in business non-residential structures and engineering was not carried forward into 2010. As a result, the growth rate was revised upward from 7.4% to 8.3%.
Business investment in residential construction, mainly estimates of alterations, was revised upward in 2009 and 2010. These estimates incorporate the latest information from the Survey of Household Spending and the Annual Survey of Service Industries: Real Estate agents, brokers, appraisers and other related activities. For the most part, the revisions from 2009 were carried forward to 2010.
Business investment in machinery and equipment was revised upward for all three years. The largest revision occurred in 2009 and was carried forward into 2010.
A large part of the revisions to government and business gross fixed capital formation in 2009 and 2010 were the result of the incorporation of estimates from the Capital Expenditures Survey. The 2009 Income and Expenditure Accounts now incorporate the revised 2009 investment data from the Capital Expenditures Survey, while the 2010 Income and Expenditure Accounts now closely align with the preliminary estimates of private and public investment for 2010.
Revisions to non-farm business investment in inventories are based on new information from the latest annual surveys. The upward revision to 2008 reflects the results of the commodity balancing process that is integral to the compilation of the Input-Output Tables, to which the Income and Expenditure Accounts are benchmarked. The upward revision in 2009 reflects the incorporation of the latest annual manufacturing, wholesale, and retail industry surveys. The majority of the revisions in 2009 and 2010 occurred in the manufacturing and wholesale industries.
Exports in current dollars were revised downward in 2008 and upward in 2009 and 2010. Revisions to exports of goods were minimal while the revisions to exports of services were more substantial in 2009 and 2010. Exports of services were revised upward by $0.46 billion in 2009 and by $1.3 billion in 2010. These upward revisions in exports of services were almost entirely the result of revised estimates of exports of commercial services. Imports in current dollars recorded a slight downward revision in 2008 and upward revisions in 2009 and 2010.
- Table 1 Selected components, current revision
- Table 2 Revisions to gross domestic product, historical perspective
- Table 3 Revisions to gross domestic product
- Table 4 Revisions to gross domestic product (growth rates)
- Table 5 Revisions to income aggregates at current prices
- Table 6 Revisions to expenditure aggregates at current prices
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