Top 6 Economic Indicators For The Canadian Economy

Over the course of North American history, Canada has evolved from a regional economic entity to functioning as a globally involved industrial society. It has established itself as a perennial top 20 industrial power and as a top 20 global exporter of goods and services.[1]

Listed below are some of the most common methods used to measure Canada's economic health. Industrial output, currency inflation, domestic consumption and international trade are elements of the Canadian economy that are addressed and measured statistically through the use of these indicators. When considered altogether, the following statistics and concepts can be used to paint a complete picture of the country's economic health.

1. GDP

Gross domestic product, or GDP, is the most-referenced statistic used when attempting to define the size and scope of a country's economic activity. It's commonly defined as being the total value of all goods and services that are produced within a country's borders. It can be represented in numerous different fashions, with the most common being as a percentage of growth from one period to the next. The indicator itself is presented both quarterly and monthly by Statistics Canada, the Canadian government's bureau of statistical measurement.

Quarterly GDP

Quarterly GDP includes outputs from all sectors of the economy and is used by investors and foreign governments alike when attempting to determine the country's longer-term economic health. The quarterly report contains the previous quarter's activity and is released four times per year, two months after the reference quarter.[2]

It is important to note that quarterly GDP refers to the aggregate economic activity in Canada for a given quarter. This means that all sectors of the economy are represented in the statistic, thus the release is looked upon as being the primary indicator regarding Canadian economic health.

Monthly GDP

The second report released by Statistics Canada concerning GDP is the monthly GDP report. It's made on a monthly basis, with the data being two months removed. For example, the data for January would be released in March. Monthly GDP is used by economists, investors and governments alike to examine Canada's current economic performance in comparison to expectations. The monthly GDP indicator is a useful tool as a sort of running litmus test regarding the nation's economic state.

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The monthly GDP figure is based on output statistics from seven production industries and 12 service industries. However, it does not include data from all sectors of the Canadian economy.. It is important to be aware of the difference between quarterly and monthly GDP. Monthly is a streamlined current representation of GDP, while quarterly is a more complete statistic.

2. Labour Force Survey

In Canada, the "Labour Force Survey" is the report that provides an official definition of the national employment level. The survey consists of both an unemployment rate and a figure of aggregate employment. The unemployment rate represents the number of unemployed persons as a percentage of the entire labor force. The aggregate employment level is the total number of paid employees, both part-time and full-time, in the business and government sectors. Age demographics, regional employment rates and industrial employment rates are taken into account and reported upon within the survey by Statistics Canada.

The Labour Force Survey provides the most current information available regarding the health of different sectors of the economy, in addition to the economy as a whole. Due directly to the fact that the survey is released monthly (from a week to 10 days after the end of the reference month), it is the most up-to-date economic indicator in Canada.[2] Independent investors and governmental policymakers rely on the report as a leading indicator concerning both the sectoral and aggregate growth of Canada's economy.

3. CPI

Canada's primary measure of inflation is the consumer price index, or CPI indicator. Released monthly by Statistics Canada, it's a representation of the price fluctuations concerning select goods and services.

The CPI is a weighted average of the goods and services included in a pre-defined "consumer basket." The primary inputs of the consumer basket and share of the CPI calculation are as follows: shelter 27.5%, transportation 19.3%, food 16.1%, household operations 11.8%, education 11.8%. The remaining portion of the basket is made up of clothing, personal care, alcohol and tobacco.[6] The weighted average components used to calculate the CPI indicator are reviewed and adjusted every three years based on changes in the spending patterns of Canada's populace.

The CPI is closely watched by the Central Bank of Canada, which has been commissioned the task of managing the inflation of the Canadian dollar. To manage the inflationary challenges facing the currency, the Bank of Canada establishes an estimated target rate of inflation. The target rate lies between 1% and 3%, and to stay current, this target is reviewed every five years by the bank.[7]

The Bank of Canada determines interest rate levels based on the target rates of inflation it establishes. Any change in policy regarding interest rates is announced eight times per year during the Bank of Canada Announcements. When considering that the CPI is released on a monthly basis, it is one of the primary indicators used by the bank in its process of crafting current monetary policy.

4. Retail Sales

A large part of every developed nation's economy is the revenue generated by its citizens or residents, or consumer spending. The retail sales indicator is the means by which consumer spending over a specific period of time is measured. Retail sales is defined as being the aggregate receipts of retail establishments that provide goods and services.[8] The retail sales statistic is released on a monthly basis by Statistics Canada, two months removed from the reference month.

Retail sales is an important indicator to developed countries, but in Canada it has a higher degree of volatility due to the fact that consumption is largely seasonal. For instance, the sale of autos in Canada represents over 25% of the total retail sales number. As a rule, most autos are purchased outside of the winter months, thus the retail sales indicator itself can be skewed one way or the other depending on the time of year as it pertains to an individual retail sales statistical release.

Also, the timing of an individual retail sales release can often fall in between the quarterly GDP reports. Due to the fact that consumer spending regarding goods makes up nearly 50% of the quarterly GDP statistic, retail sales is considered to be a leading indicator in relationship to quarterly GDP.[2]

5. Housing Starts

The construction sector of Canada's economy is substantial in respect to total output, registering between 5% and 10% of GDP annually. The housing starts indicator is the exact number of residential housing projects started by construction companies over a specific period of time.[10] The statistic itself is reported every month by the Canadian Mortgage and Housing Corporation, usually 10 days after the reference month.

Housing starts can be useful in observing the impact of current monetary policy. For instance, housing starts have a tendency to rise when interest rates regarding construction loans and mortgages are low to developers and potential home buyers. Conversely, housing starts tend to fall when monetary policy tightens and interest rates increase incrementally. Housing starts are seen by many to be a leading indicator when examining the inflationary concerns facing a nation's currency.

6. Merchandise Trade

Canada relies heavily on the exportation of goods and services as a means of generating revenue. Annually, total exports represent nearly half of Canada's GDP. Also, Canada is one of the few developed nations that functions as a net exporter of energy products.[11] Trade partners range from Asia to Europe, but the United States is by far the largest trade partner with which Canada does business.

Merchandise trade is a key statistic for the Canadian economy when taking into account the value of its production and natural resources. The merchandise trade indicator measures the difference between the amount of tangible goods and services imported by Canada, and the amount of tangible goods and services exported. Essentially, the merchandise trade indicator represents the trade balance. Merchandise trade is released monthly by Statistics Canada, with the report coming six weeks after the reference month.[2]

The exchange rate of the Canadian dollar is especially sensitive to the merchandise trade statistic. Due to the fact that international trade is conducted using foreign currencies as a mode of payment for goods and services rendered, the exchange rates become very important factors in the actual transactions regarding exported goods and services.


Industrial output, currency inflation, employment, consumer spending, construction spending and trade balances are all crucial components of any nation's economy. The indicators listed above formally address these topics, and when taken in total, provide a picture of the Canada's economic health.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.



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