Canada’s economy could be called one of the “peaceful” ones in the world. Being located far in the west, Canada has been away from major conflicts throughout history. This and economic politics and values Canada has held through the years have rewarded the country with a relatively stable economy, as the main indicators of Canada’s economy imply.
In this article, we discuss the main indicators of Canada’s economy and talk about them through the years of this century. So if you are interested, just stick around till the end of the article!
Table of Contents
Canada’s GDP, one of the most significant economic indicators
Gross Domestic Product (GDP) is an important index to assess the economic features of a country, and one of the main indicators of Canada’s economy. The World Bank defines GDP this way:
“GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.”
To make it easier, it can be said that “GDP is the monetary value of all finished goods and services made within a country during a specific period.”
GDP is an excellent indicator of Canada’s economy to understand if its economy is growing or not. Still, with GDP alone, you can’t make a good comparison between different countries, for you need to consider the population.
Canada’s GDP in the 21st century
In the following chart, you can see Canada’s GDP in the 21st century.
Canada’s GDP has been on the rise, as you can see, but what one notices are two or three drops in 2009, 2015-16, and 2021.
The first significant drop in this main indicator of Canada’s economy in 2009 was caused by the global economic and financial crisis starting in 2007; many countries experienced the recession, Canada was no exception. The second drop happened in 2015-16, the price of crude oil had a notable fall which ultimately resulted in a recession in Canada’s GDP. The last drop needs the least explanation; the pandemic caused it.
Comparing Canada’s GDP with other countries
The below chart shows the difference between Canada’s and USA’s GDP. To get a better understanding of Canada’s GDP, we compared it to other countries from different regions, mostly with countries that are considered as a destination for emigrants or countries with almost the same amount of population.
Canada has around a 38 million population, while Spain has 46, Australia has 25 million, the UK has 67 million, and New Zealand has 5 million people.
The studies show that as of now (Q4 2021), the GDP of Canada has started its growth, overcoming issues caused by the pandemic.
GDP distribution in Canada by province
In Canada, the governance is Federal, meaning each province has its government and income, so not all provinces have the same GDP. Here is a graph to show the GDP of each province.
Canada’s GDP Per Capita, indicating each person’s share of economy
GDP per capita, another main indicator of Canada’s economy, is defined as GDP divided by population, showing the average share for each person from the domestic gross.
As you can see, the GDP per capita has an upward trend in general, but same as the GDP, it has declined in specific years.
To better understand Canada’s economy toward people, let’s compare Canada with some other countries: Canada is the 9th country to have the highest GDP, and Canada’s GDP per capita is 19th (Based on 2020 data). If you want to have another point of view towards Canadian’s income and GDP per capita, you can check out this article!
Comparing Canada’s GDP per capita with other countries
Firstly, let’s compare Canada’s GDP per capita with the United States. As you can see, in the 21st century, Canada has had an upward trend, closing its gap with the United States, but the hit Canada took from economic crises seems harder than the United States.
The chart shows us that except for the USA, other countries had declines in certain years, but not as severe as Canada’s. The next few years after the pandemic will show how each country will fare with its declines and how well it recovers from it.
Components of GDP in Canada, Sources of income
The GDP, as one of the main indicators of Canada’s economy, consists of two parts, Good-Producing Industries, and Service-Providing Industries. Service-Providing Industries have a bigger share, and among them, real estate and rental and leasing is the biggest portion, almost making 23.5% of Canada’s GDP in August 2021.
You can read more about Canada’s industries in the article written about it.
These shares are not the same in each province and territory. Based on what natural sources they have and what kinds of services they provide, what institutes are established there, the share is different.
As it is visible in the above graphs, Canada’s economy is mainly based on service-providing industries rather than natural-sourced industries. It is true relating to provinces and territories, too; the superiority leans on service-providing industries.
Inflation in Canada
Another feature of each economy is inflation. It is also one of the main indicators of Canada’s economy. To explain it quickly, it shows the value of money through time, the amount of money needed to buy a certain amount of goods at a point in time, compared to a base point.
The inflation rate is usually calculated yearly, and its changes are expressed in percent.
Comparing Inflation in Canada with other countries
The following table and graph show the annual percentage of inflation in the past ten years, so you can compare this main indicator of Canada’s and other countries’ economies.
Consumer price index in Canada and other countries
The inflation percentage does not give a clear idea if one is not familiar with economic subjects. To make it understandable, let’s look at it another way; if the price of certain goods, or services, is 100 units in 2010, how much will it be in 2020 given the inflation? It’s pretty easy to calculate; one has to add the percent to the amount of the previous year, starting with 100 units. The result will be:
Of the countries compared here, Canada has the lowest rise in price, giving it an edge on this main indicator of economy.
Canada’s headline inflation
Another index for inflation is headline inflation. To make a simple explanation, it calculates the percentage of inflation from a certain point in time to another point, usually calculated yearly. As of October 2021, the headline inflation of Canada is 4.7%, the highest since 2003.
As for a reason for this high inflation, economists believe it’s a simple matter of demand and supply. During the pandemic restriction times, the demand and supply both were low, but now that the restrictions are lifted, the consumer demand has risen, but the supply has not been on the rise as much. This contradiction between supply and demand has caused inflation, and some experts believe that these high inflation rates will be here for a couple of years.
Canada’s currency, and currency value
In any country, the currency and its value reflects on the country’s economic power. Canada is no exception, so Canada’s currency is one of the main indicators of Canada’s economy.
The Canadian Dollar is the main currency in Canada. Like US Dollar, the Canadian Dollar consists of 100 cents. In Canada today, there are 5¢ (nickel), 10¢ (dime), 25¢ (quarter), 50¢ (50¢ piece), $1 (loonie), and $2 (toonie) coins; although some of them are not distributed through mint and banks anymore and are not available much. The bills used in Canada are $5, $10, $20, $50, and $100 bills.
Comparing CAD and other currencies.
One of the points that matters the most about a currency is its value in comparison to other common currencies around the world, especially USD. As of today (March 2022), 1 Canadian Dollar equals 0.78 USD and 0.71 Euro.
The chart above shows the comparison of the Canadian dollar with USD and EUR. As you can see, the gap between the USD and the Canadian dollar has widened through recent years, showing that the drops in GDP have had their effects on the value of the Canadian dollar too. Also, it can be said that in 2021, after controlling the pandemic and its impact, the Canadian dollar’s value has started to rise; if the trend continues as it is, the gap might begin to close even more.
Cost of Living in Canada
To sum the indicators of Canada’s economy chapter up, let’s take a look at the costs of living in Canada. The costs of living in Canada could be divided into housing, foods and groceries, transportation, and childcare:
- Housing: renting, insurance, utilities, etc.
- Foods and Groceries
- Transportation: gas price, auto insurance, public transportation, etc.
- Childcare: preschool, etc.
The table below shows estimated amounts of money needed for a family of 3 monthly to live in each province. Please take note prices might vary in different situations. This table is just an estimation.
Last words main indicators of Canada’s economy
And thus, we finish our article about main indicators of Canada’s economy, in hopes that it could help you know more about Canada and its economy. In this article we discussed Canada’s GDP, GDP per capita, inflation, currency, and cost of living in Canada.