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Section 6: Macroeconomic and financial statistics

The Canadian economy recorded a total output value of about $1.45 trillion dollars in 2006 (table 6.1). The growth of real GDP and its sub components in 2006 closely mimicked the previous year. Buoyed by the increasing price of petroleum and other resource commodities, real GDP grew by about 2.8% in that year (lower than the +3.1% recorded in 2005) (table 6.2).

In 2006, final domestic demand, which is the sum of personal expenditure on consumer goods and services, government current expenditure on consumer goods and services and government and business investment spending, was recorded at about $1.3 trillion (+4.7%). Consumer spending (+4.2%) and business investment in non-residential structures and equipments (+9.9%) were the leading contributors to real GDP growth (table 6.2). Indeed, final domestic demand was the most significant contributor to GDP growth from 2002-2006. Over this period, the growth rate of real final domestic demand (+18%) outpaced real GDP (+11%) growth. Business investment as a whole grew by about +40%, while personal expenditures on consumer goods and services, which accounted for about 59% of GDP (in 2002 chained dollars) in 2006 also recorded a +15.2% increase over the same period (table 6.2 and chart 6.1).

Chart 6.1 Growth of the components of real GDP, Canada, 2002 to 2006
Source(s):  Statistics Canada, National Income and Expenditure Accounts, Quarterly estimates, Catalogue no 13-001-X and CANSIM tables 380-0016 and 380-0017.

Reflecting the post industrial nature of Canada’s economy, in 2006, about 64% of GDP was generated in the service sector, while the goods-producing sector accounted for the rest of GDP (table 6.3). Construction (+8.1%), Wholesale trade (+7.1%) Retail (+6.0%) as well as Finance, Insurance, Real Estate, Rental and Leasing and Management of Companies and Enterprises (+3.8%) were the main industries contributing to GDP growth in 2006. However, Manufacturing (-1.0%) and Forestry and Logging (-2.1%) were hard hit (table 6.3). The decrease in manufacturing revenues was mainly due to a fall in earnings from non-durable goods (mainly clothing, textile, and leather manufacturing) owing partly to stiffer competition from emerging economies such as China. It is also important to emphasize the roles that the appreciation of the Canadian dollar and the rise in energy prices (which serve to drive up the price of industry inputs) play in hampering production in the manufacturing sector.

On its part, the forestry sector was hit by low prices for lumber due to a slump in US housing demand and the sagging demand for pulp and paper (due to a decline in circulation of newspapers owing to the increasing popularity of the internet).

Alberta continued to lead other provinces in economic growth for the third consecutive year. Economic expansion in Alberta (+6.6%) was more than double the national average. Oil prices continued to rise throughout 2006, thus investors were motivated to invest in Alberta's oil sands, which in turn benefited most areas of the economy (table 6.5).

Much of the rest of Canada recorded growth rates below the national average, the only other provinces that managed to top the 2006 national growth rate were British Columbia (+3.3%), Manitoba (+3.2%), New Brunswick (3.0%) and Newfoundland and Labrador (+3.3%), (table 6.5 and chart 6.2).

Chart 6.2 GDP growth, Canada, provinces and territories, 2005 to 2006
Source(s):  Statistics Canada, Income and Expenditure Accounts - Provincial Economic Accounts (Survey 1902) and CANSIM table 384-0002.

Household Assets and Liabilities

In 2006, the accumulated worth of Canadian households was about $4.6 trillion (+9.2%), up from the 2005 growth rate (+7.5%). This was partly due to strong gains in the value of Canadian and foreign equities, manifested by the fact that increases in share asset values accounted for almost two-thirds (+60%) of the increase in financial assets. Increases in the values of residential real estate (non-financial assets) also impacted growth in net household worth (table 6.15).

Despite the increasing level of Canadian households’ net worth, they continued to build up mortgage and consumer credit debt. As a result, in 2006, household debt (total liabilities) continued to outpace personal disposable income (seasonally adjusted at annual rates). Canadian households carried about $1.30 in debt for every dollar of their disposable income (total liabilities divided by personal disposable income) (tables 3.9 and 6.15).

Price Indexes

Prices across the economy grew by +2.0% in 2006 (the target set by the Bank of Canada). However, between 2002 and 2006, the all items price index grew +9.2%, an average of about 1.8% per annum. During 2006, gasoline prices (+5.5%) experienced the steepest hike, and for the period 2002-2006, the prices of gasoline (+39.9%), and alcoholic beverages and tobacco products (+21.7%) recorded the highest increase in the economy (table 6.12).

In 2006, manufacturers as a group received an average of +2.3% more for their products than in 2005, much higher than the +1.6% increase recorded in 2005 (table 6.11). The increase in the Industrial Product Price Index (IPPI) was driven largely by prices for primary metal products, which remained on an upward trend, reaching a yearly average of +20%, higher than for 2005 as a whole. Other products that were among the largest contributors to the increase in the IPPI were petroleum and coal products (+9.0%), tobacco products (+7.9%), electrical equipment appliance and components (+6.6%).

The value of the Canadian dollar in terms of the US dollar strengthened on average in 2006, rising 6.8%. If the effect of the exchange rate had been excluded, the annual increase in the IPPI would have been 4.1% compared with its actual increase of 2.3%.

Strong Business Indicators

The number of cases of business bankruptcies declined by 10.3% in 2006 (table 6.17). Canadian corporations earned record high operating profits of $243.6 billion in 2006, led by solid growth in the Oil and gas extraction and support activities, mining (except oil and gas) wholesale, retail and construction industries. Depository credit intermediaries (+21.9%) also recorded impressive profit growth for the year (table 6.9).

Resource industries (Oil and Gas and other mining industries)

Increases in world commodity prices that began in 2003 have generated a resource boom in Canada. The rise in the prices of oil and metals and solid global demand for these resources has been particularly instrumental in helping resource firms accrue big increases in their operating profits. In 2006, Oil and gas extraction companies' profits increased by +9.1% over 2005 levels and passed the $32 billion mark for the first time. This figure is more than double the figures in 2002 (table 6.9).

Also, increasing demand for metals like copper, nickel, zinc and Iron ore from rapidly industrializing countries such as China pushed up the prices of these metals. This in turn powered operating profit in the mining (except oil and gas) industry to $4.6 billion, almost tripling the figure recorded in 2002 (table 6.9).

Retailers and wholesalers

Propelled by robust consumer spending, operating profits in the retail sector reached a record high of $13.6 billion, marking a +18.9% increase over 2005 levels. Operating revenues also jumped 4.6% for the year, as low interest rates, and a favourable labour market for employment continued to stimulate activity in retail establishments. Wholesalers' profits of $17.0 billion were also up +16% over 2005 (table 6.9).


Operating profits in the construction industry jumped to $11.4 billion in 2006 from $8.3 billion the previous year (table 6.9). Thriving demand for residential and non-residential space in Western Canada lifted the value of building permits to new highs. Construction work toward the 2010 Winter Olympics also contributed to this increase in operating profits of construction industries.


Hampered by the currency exchange rate and increasing foreign competition from newly industrialised countries, the operating profits of manufacturers declined to $42.7 billion (-4.2%) from $44.6 billion in the previous year (table 6.9). Returns on export sales were adversely affected by the strong Canadian dollar, which led to a sluggish demand for Canadian goods in the US market. This in turn led to total Canadian exports to the United States registering their first annual decline in three years (table 7.2).

Other business Statistics

Overall, the operating profit margin of corporations increased for a fifth consecutive year in 2006, rising to 8.5% from 8.2% in 2005. Operating net profits also increased by 6.8%. However, in 2006, the return on average shareholders' equity fell to 12.52% from 12.58% in 2005 (table 6.10). Nonetheless, it remained well above the recent low return of 5.7% earned in 2002.

Capital Expenditures

Capital Expenditures are the gross expenditures on fixed assets for use in the operations in organizations or for lease or rent to others. This includes cost of all new buildings, engineering, machinery and equipment which normally have a life of more than one year and are charged to fixed asset accounts. It also includes modifications, additions and major renovations and capital costs such as feasibility studies, architectural, legal, installation and engineering fees. Capitalized interest charges on loans with which capital projects are financed and work done by own labour force are also included.

It is evident that the impressive increases in operating profits and the generally favourable financial status of companies and corporations had some impact on business decisions to increase expenditures on capital projects. This culminated in businesses, governments and institutions spending $297 billion on capital expenditures in 2006. This represents a +8.8% rise over the figures recorded in 2005. Along with the oil and gas extraction and the utilities sectors, public transportation and government spending led the way (table 6.8).

With the price of crude oil reaching record levels in 2006, firms did not need much convincing to increase their investment in the energy sector. Boosted by a host of new projects in the Alberta oil sands, capital expenditures by companies in the mining and oil and gas extraction sector reached about $54 billion in 2006, up about +$4.6 billion from 2005 (table 6.8).

In 2006, capital expenditures by Canada's utilities (including electric power, natural gas distribution and "water and sewage and other systems) reached $17.2 billion (+27.8% or +$3.7 billion) from 2005 (table 6.8). This increase was largely due to increased capital spending in the electricity sector, natural gas distribution, and Municipal water utilities and investment in water and sewage infrastructure.

In 2006, Public administration recorded a large increase in capital expenditures of $2.8 billion (+12.2%) mainly due to a substantial increase in capital expenditures by provincial and territorial public administration (table 6.8).

Capital expenditures in the transportation and warehousing sector reached about $14 billion in 2006, a +18.6% increase from the previous year. This rise in spending was directed to the transit and ground passenger industry, and pipeline transportation.

On the other hand, the growth of capital investment on housing appeared to have intensified, recording an 8.5% increase in 2006, against the +5% recorded in 2005 (table 6.8).

Federal and Provincial government revenues

As shown in (table 6.6-2), from 2005-2006, the federal government’s income from direct taxes increased by 5.5% (from $141 billion to $149 billion). Also, direct taxes accounted for 65% of the income accrued to the federal government, up from about 61% in 2002. On the other hank, direct taxes as a proportion of provincial governments' income remained almost constant over the same period at 27.8% in 2006. However, from 2005-2006, provincial governments' income from direct taxes increased at a faster pace (+7.2%), than those accruing to the federal government (+5.5%) (table 6.6).