Latest Developments in the Canadian Economic Accounts
The 2013 to 2015 revisions of the Income and Expenditure Accounts Latest Developments in the Canadian Economic Accounts
The 2013 to 2015 revisions of the Income and Expenditure Accounts

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Introduction

This article describes the revisions of the Gross Domestic Product by Income and by Expenditure Accounts for the period from 2013 to 2015. These follow the November 9, 2016 release of the 2015 Provincial and Territorial Economic Accounts estimates, which included revisions to the 2013 and 2014 period.

The first two quarters of 2016 are also revised at this time. However, since these estimates will continue to be revised during upcoming cycles, in accordance with our standard revision practice, they are not included in the analysis presented in this article.

Revision process

Estimates for the Gross Domestic Product by Income and by Expenditure Accounts are subject to three types of revisions. The first type involves incorporating the latest benchmark from the supply-use tables. The second type involves incorporating data from the latest annual surveys and administrative data. The third type of revision, which is performed less frequently, refers to the incorporation of new concepts, methods, accounting standards and classification systems.

The 2013 to 2015 revisions to the Gross Domestic Product by Income and by Expenditure Accounts include only the first two types of revisions. In general, these two types of revisions, which are statistical in nature, are carried out annually and impact only the last three years of the time series.

The statistical revisions to gross domestic product (GDP) reflect the incorporation of the most current data sources, including survey results, administrative data, public accounts and the annual supply-use tables. These tables incorporate the highest-quality data sources available to Statistics Canada in a rigorous, detailed accounting framework. Consequently, they represent the most detailed, coherent accounting system for the structure of the Canadian economy and are considered the most accurate benchmarks on which to base estimates. In this release, new benchmark values from the supply-use tables for the 2013 reference year have been incorporated into the GDP by Income and by Expenditure Accounts. New benchmark information (from annual surveys and administrative data) is also included for the last two years (2014 and 2015, which are subject to revision in the following two annual revision cycles).

This article briefly describes and explains the impact of the 2013 to 2015 revisions on annual and quarterly GDP, on both a nominal and a real basis. It also examines the revisions to the various components of GDP by income and by expenditure.

Revisions to the growth of nominal GDP

The revision to the annual growth rate of nominal GDP increased the rate by 0.29 and 0.24 percentage points in 2013 and 2014 respectively. The growth rate in 2015 decreased 0.36 percentage points as a result of the revision process. The revisions to 2013 were due to the incorporation of new benchmark data from the 2013 supply-use tables. Revisions to both 2013 and 2014 resulted in increases to gross operating surplus and gross fixed capital formation. Although nominal GDP increased in 2015, the higher 2014 estimate forced the 2015 growth rate to consequently be revised down. Sources of revisions were small increases to gross operating surplus of non-financial corporations (2013, 2014), compensation of employees (2015), gross fixed capital formation (2013, 2014) and final household consumption expenditure (2014). Offsetting these increases were declines in gross operating surplus of financial corporations (2013, 2014, 2015), gross mixed income (2013, 2014, 2015) and a disinvestment in non-farm business inventories (2013, 2015).

For the period 2013 to 2015, the mean absolute percentage point revision to the annual growth rate in nominal GDP was 0.05 percentage points (see Table 1).

On a quarterly basis, the revisions to the growth rates of nominal GDP resulted in little change relative to the previous estimates. The magnitude of the revisions for the 12 quarters covered by the revision period ranged between an upward revision of 0.20 percentage points to a downward revision of 0.31 percentage points. These revisions are consistent with historical averages. Overall, there were upward revisions to six quarters and downward revisions to six quarters. Over the revision period, the quarterly trend remained similar to the trend of the previously published estimates, with the exception of the fourth quarter of 2015 where the -0.1 growth rate was revised to +0.1%.

Revisions to the growth of real GDP

The annual growth rate of real GDP was revised upward by 0.26 percentage points for 2013, by 0.10 percentage points in 2014 and revised down by 0.14 percentage points in 2015.  Again, real GDP volumes in 2015 were revised slightly up, but not to the extent that they were in 2014, resulting in the downward decline of the growth rate.

The mean absolute percentage point revision to the annual growth rate in real GDP for the 2013 to 2015 revision period was 0.08 (see Table 3).

Due to minimal changes in the commodity composition, the aggregated chained price indexes were revised slightly upward by 0.1 percentage points for 2013, 0.2 percentage points in 2014 and downward by 0.2 percentage points for 2015.

The quarterly growth rates of real GDP for 2013 were higher than the previous estimates, with the rate revised upward by 0.21 percentage points for the second quarter and by 0.14 percentage points in the third quarter.

For 2014, the estimates were revised downward in all but the second quarter, which had an upward revision of 0.13 percentage points.

For 2015, real GDP growth was virtually unchanged for all four quarters, with the third quarter revised up slightly more than the others, although still less than one tenth of a percentage point, at 0.04.

Overall, the mean absolute percentage point revision to the quarterly growth rate in real GDP for the revision period was 0.02.

Revisions to the level of annual GDP

For the 2013 to 2015 period, the revisions to the GDP by Income and by Expenditure Accounts were mainly attributable to the new supply-use benchmarks for the 2013 reference year and to the incorporation of updated source data in subsequent years.

These statistical revisions resulted in an upward movement of the GDP level for the revision period. Overall, the level of nominal GDP was revised upward by $5.3 billion for 2013, by $10.1 billion for 2014, and by $2.9 billion for 2015, relative to the previously estimated GDP values.

In each of these three years, substantial revisions were made to various components of GDP. The main contributors were increases in the value of gross operating surplus on the income side and business gross fixed capital formation on the expenditure side, as the supply-use tables exploited the detailed information contained in the annual business surveys and the final estimates of the Capital and Repairs Expenditure Survey.

Revisions to the components of the GDP by income account

The main source of revisions for the three years was the revision to the value of gross operating surplus. This value was adjusted upward by $6.8 billion for 2013, by $10.4 billion for 2014, and by $1.5 billion for 2015. All of the upward revisions in this component came from non-financial corporations, as estimates of gross operating surplus for financial corporations were revised down slightly. Estimates of gross mixed income and the consumption of fixed capital for government and non-profit institutions serving households were also revised down slightly. Taxes less subsidies on products and imports were revised down in the latter two years only.

The incorporation of estimates of employee compensation based on administrative data for 2013 and 2014 resulted in a downward adjustment of the level of compensation of employees for both of these years and an upward revision to 2015. The levels for 2013 and 2014 were revised downward by $0.9 billion and $0.6 billion respectively, while 2015 was revised upward by $1.4 billion.

These revisions are mainly due to the new supply-use system benchmarks in 2013, the incorporation of operating surplus estimates for the financial or non-financial corporations sector based on 2015 tax data and the incorporation of new data from the Canada Revenue Agency.

Revisions to the components of the GDP by expenditure account

Estimates for household final consumption expenditure were revised upward for all three years, with upward revisions in goods outpacing that of services in 2013 and 2014, while in 2015 services revisions were higher than goods.

Government final consumption expenditure was lower than previously reported in all three years, with the most significant being a $3.8 billion reduction in 2013 and a $2.1 billion reduction in 2015. These revisions reflect new data from the supply-use system benchmarks for 2013 and new public accounts data.

Business gross fixed capital formation was revised upward for every year in the 2013 to 2015 period. The largest revisions were for 2014 (+$14.3 billion) and 2015 (+$11.3 billion). The main factor in these upward revisions was non-residential structure construction and investments in machinery and equipment. The revisions reflect final estimates of capital investment data from the supply-use tables. These estimates incorporate new data from the Capital and Repair Expenditures Survey, released in May 2016.

The estimates of government gross fixed capital formation were revised downward for 2014 ($4.5 billion) and 2015 ($3 billion), while 2013 was virtually unchanged.

The revisions to the estimates of business inventories were significant in 2015, declining $3.1 billion, all in the non-farm category. These revisions reflect new data from the Annual Survey of Manufacturing, the Annual Wholesale Trade Survey and the Annual Retail Trade Survey.

Exports of goods and services were revised down slightly in 2013 (-$724 million) but upward in 2014 and 2015, by $1.7 billion and $1.8 billion respectively. The downward revisions to 2013 were primarily in the exports of goods, while the more significant increases to 2014 and 2015 arose from exports of services as data from the annual survey of international trade in services were incorporated into the GDP by expenditure accounts. These upward revisions are primarily due to the revision of exports of commercial services.

Imports of goods and services were revised significantly upward in 2014 ($3.3 billion) and 2015 ($3.5 billion). As in the case of exports, the revisions to imports of goods are minor, while the revisions to imports of services are significant for 2014 and 2015. They were revised upward by $2.9 billion for 2014 and $3.3 billion for 2015.