Glossary

Average annual change calculations
Capital investment
Employment
Exports and imports
G-7 countries
International comparisons and purchasing power parities (PPPs)
Manufacturing intensity
North American Industrial Classification System (NAICS)
Performance indicators
Research and development expenditures
Shipments
Sources of data
Value added

Average annual change calculations

The calculations in average annual change in the tables on Capital Investment, and Research and Development Expenditures / Technology are based on the least square method which results in a different measure of average growth compared to a simple arithmetic calculation of the difference between two years. The least squares calculation, a logarithmic transformation of the compound growth equation, provides a more accurate measure of growth. More information on the calculation method and its advantages over the simple arithmetic calculation can be found in "Johnston and DeNirado (1980) Econometric Methods 4^th Edition".

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Capital investment

Investment in capital (fixed assets) has a major impact on production, productivity, efficiency and competitiveness. Since investment goods are long-term assets, their benefits are to some extent cumulative. Key indicators of capital investment therefore include not only annual capital expenditures but also the capital stock. Capital stock is the cumulative value of capital expenditures, less depreciation and the disposal of capital equipment. It can be expressed on both a gross and a net basis, the difference between the two being the accumulated depreciation.

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Employment

Employment statistics are indicators of the standard of living that the industries support and its socio-economic importance.

With labour income representing almost 60% of GDP, employment is a key element of production. In this publication employment is measured in terms of the number of employees, total wages and salaries and average annual wages. The data in the tables come from two sources; one being the Survey of Employment, Payrolls and Hours (SEPH), and the other, the Annual Survey of Manufacturers (ASM).

The Survey of Employment, Payrolls and Hours (SEPH) is based on administrative data that companies file on their employees as they remit income tax, Canada Pension and Employment Insurance payments to the Government. The Annual Survey of Manufacturers is a survey of the manufacturing industries of Canada. It is a survey of all manufacturing establishments as well as sales offices and auxiliary units associated to these establishments.

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Exports and imports

Exports and imports represent the interaction between global demand and domestic supply, measured by the flow of goods between Canada and its trading partners. In combination with data on industrial production, trade statistics show the extent of export orientation, import penetration, and market shares for particular commodities or industries – key indicators of competitiveness in world markets.

Trade data are compiled from customs documents and show trade by commodity classified by either the North American Industrial Classification System (NAICS) industry that produced the product or by the commodity itself, using the Harmonized System (HS), an international commodity classification system.

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G-7 countries

The G-7 countries are Canada, France, Germany, Italy, Japan, United Kingdom and the United States of America.

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International comparisons and purchasing power parities (PPPs)

International comparisons for the Group of Seven (G-7) major industrialized countries and Mexico are from the OECD’s Main Economic Indicators and the STAN (Structural Analysis) Database for Industrial Analysis. For the purpose of international comparison, data on the comparisons among countries are expressed in U.S. dollars and Purchasing Power Parities (PPPs) Conversions into U.S. dollars are at average annual rates. PPPs are rates of conversion that adjust for international differences in price levels in order to provide better estimates of purchasing power by country. PPPs can be expressed in domestic currency or in U.S. dollar terms.

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Manufacturing intensity

Manufacturing intensity is the value added to a product by manufacturing calculated and recorded as a percentage of the value of the manufacturers’ shipments. Value added is the value that is added to a product by, for instance, producing baked goods from flour, sugar, salt, yeast, eggs, water, and vegetable oils.

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North American Industrial Classification System (NAICS)

Industry Profiles presents a broad range of data by industry as defined by Statistics Canada’s North American Industrial Classification System (NAICS), a classification system used by Canada, the United States and Mexico. NAICS classifies businesses according to their principal industrial activity, with increasing levels of detail designated by 4-, 5-, and 6-digit codes. NAICS is a variation on the International Industrial Classification System (ISIC). The tables in Industry Profiles are structured mainly at the 5-digit NAICS industry level.

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Performance indicators

Productivity is a measure of the efficiency of the various inputs employed in the production of goods. Labour productivity (output per person) is a partial productivity measure. It measures output (defined as GDP at factor cost) per person. It can also be expressed as an index.

Capacity utilization measures the percentage of plant capacity being used, and is calculated as the ratio of actual output to potential output. Potential output is the maximum output obtainable from the capital stock, estimated on the basis of peak output/capital ratios.

Import penetration is the relative share of imports in the supply of goods available for domestic consumption. Import penetration expresses imports as a percentage of domestic supply, which is shipments minus exports plus imports.

Export orientation is the proportion of gross output that is exported, and is expressed as a proportion of shipments.

Capital-to-labour ratio measures how intensively capital is employed in the production process relative to labour. It is expressed as an index of the constant-dollar net capital stock divided by the number of employees. The capital/labour ratio may be expected to increase over time as companies strive to improve their profitability, productivity and competitiveness through increased capital investment.

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Research and development expenditures

Research and development (R&D) expenditures, similar to capital investment, affect a company’s ability to remain competitive and profitable in an ever-changing environment. These expenditures encompass both original research into new technologies, and the application of research findings or other scientific knowledge to develop new or significantly improved products, processes or services.

The R&D to revenue ratio takes the overall size of each industry into account by expressing expenditure on R&D as a percentage of revenues. A company does not necessarily have to engage in R&D in order to invest in advanced technology, it can buy technologically advanced equipment. Businesses may also acquire technology developed by a foreign affiliate, a common practice among multinational corporations. The firm’s R&D may be undertaken in a single country or a number of countries, it all depends on the firm.

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Shipments

Shipments are the value of goods shipped at the factory gate. They are a measure of gross output in the sense that they include the gross value of all inputs used to produce the final product, including the value of goods purchased from other businesses. Aggregate shipments include goods that may be counted more than once- first by the initial producer and again by the firms that incorporate them in their final product. The values of shipments include an element of double-counting, eliminated by using a measure called value added.

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Sources of data

Each table refers to the original statistical source – a Statistics Canada publication, another Government of Canada source or in the case of international comparisons, the Organisation for Economic Co-operation and Development (OECD). Many of the data are also available from Statistics Canada’s CANSIM database (Canadian Socio-economic Information Management System).

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Value added

Value added is the value a firm adds to the goods that it manufactures. It is the equivalent to the value of the factory shipments and inventories, less the cost of materials, supplies and services purchased from other businesses. For the bakery industry, for example, value added includes the value of the bread that is shipped but excludes the costs of the flour, sugar, yeast, and other ingredients packaging, fuel and electricity purchased from suppliers.

The statistical measure of value added is known as Gross Domestic Product at Factor Cost (GDP at Factor Cost). It is calculated on a constant-dollar basis, to remove the effects of inflation. Changes in value added are thus proportional to changes in quantities produced, and are not affected by increases or decreases in prices.