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Table 1.A shows the Purchasing Power Parities (PPP) and real expenditure per capita statistics for 2009. The data are shown both in terms of consumption and expenditure. The former is more appropriate for international comparisons, as these data are corrected for varying levels of state involvement in the financing of consumption. For example, while individual Americans purchased 46 percent more overall than Canadians on a per capita basis in 2009, they actually consumed only 23 percent more. This reflects the fact that the government sector finances individual consumption to a greater extent in Canada than in the United States.

Table 1.A United States/Canada PPPs and real expenditure per capita, 2009

The per capita volume of gross fixed capital formation in the United States declined to 79 percent of that in Canada in 2009 from 114 percent in 2002. From 2002 to 2009, total business residential construction in the United States fell 44 percent in real terms compared to an 8 percent increase in Canada while the volume of U.S. business final demand for machinery and equipment increased 10 percent compared to a 22 percent jump in Canada. The faster pace of growth in machinery and equipment in Canada is partly due to a stronger Canadian dollar over the period, which reduced the price of imported machinery and equipment.

Consumer and capital goods together have a PPP of 0.81, meaning that the purchasing power of the Canadian dollar over goods was 81 percent that of the U.S. dollar in 2009. On the other hand, a PPP of 0.97 for consumer and government services combined, means that there was almost equivalent purchasing power in terms of services overall.

After 2004, both individual consumption expenditure and actual individual consumption of Americans vis-à-vis Canadians declined (see Chart 2). This reflects the impact of terms-of-trade adjustments that resulted in increases in purchasing power of the Canadian dollar up to 2008. By 2009, per capita individual consumption expenditure in the United States was only 46 percent more than that in Canada, compared to 57 percent in 2002, while actual per capita individual consumption was only 23 percent higher, versus 34 percent in 2002.

Chart 2
Ratios of real consumption per capita, United States versus Canada
Description for Chart 2

The PPP for the total economy and a number of its components increased significantly from 2002 to 2008 (see Chart 3). The PPP rose to 0.90 in 2008 (the highest level on record, dating back to 1992) from 0.83 U.S. dollars per Canadian dollar in 2002, before declining to 0.88 in 2009. From 2006 to 2008 the exchange rate exceeded the PPP for GDP, meaning that the actual purchasing power of the Canadian dollar was less than the exchange rate was suggesting during that period.¹

The downturn in 2009 is partly attributable to the recent economic malaise in the United States, which was reflected in weaker prices there than in Canada.  In addition, there was an improvement in the relative terms of trade in favour of the United States after six years of deterioration.² This was driven by a large decline in the price of energy³ and a depreciation of the Canadian dollar against the U.S. dollar (see Chart 3), which raised the relative price of exports to imports in the United States, and lowered it in Canada.

Chart 3
PPPs for GDP and major components (consumption-based)
Description for Chart 3

Note:   The PPP for the balance of exports and imports is virtually identical to that of domestic expenditure, and so, for clarity, is excluded from the chart.

Chart 4
United States/Canada PPPs: OECD versus Statistics Canada
Description for Chart 4

New results compared with OECD estimates

PPP data from the OECD multilateral study, expressed in terms of units of foreign currencies per Canadian dollar, are also published by Statistics Canada. As can be seen in Chart 4, the OECD's PPP for the total economy (United States/Canada) is lower than that of this study due to this report's use of improved estimates of prices, including a different proxy for the PPP for net trade (see Key changes for a more detailed discussion) and up-to-date expenditure data (weights). The different movements in the two PPP series stem from the different extrapolation methods. The Statistics Canada PPP uses the relative changes in the implicit price indices for final domestic demand in the two countries, which captures changes in the terms of trade. The OECDPPP, on the other hand, is projected from the latest benchmark year using the relative changes in the two countries' GDP implicit price indexes.

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Notes

1. This does not mean that the Canadian dollar was overvalued during this period or the last time this occurred (1992). As mentioned in Context, factors other than final demand for goods and services can influence the exchange rate.
2. The U.S. terms of trade grew 6.0 percent from 2008 to 2009 after 6 years of weakness, while the Canadian terms of trade declined 9.5 percent in the same period after six consecutive years of growth.
3. The Canadian price of energy exports declined 35 percent while the price of petroleum and related products imported into the United States dropped 39 percent from 2008 to 2009.