Revised GDP estimates

November 12, 2002

Interpreting Statistics

The recent revision to provincial GDP data illustrates the kind of problems one can encounter in interpreting statistics. For some data series Statistics Canada puts out preliminary, revised and final numbers although nothing is ever really final. Years after the fact entire sets of data can be revised using new methodologies.

On November 9th I wrote that "As a result of the revision by Statistics Canada, BC's 2001 GDP growth after inflation went from a positive 0.9% to slightly negative, but that is not due to any downward revision for 2001 GDP. It is because the estimate for 2000 was revised upward by $2 billion." That conclusion was reached by dividing the revised current dollar GDP data by the implicit price deflator for the previous series. The result produced a 1997 constant dollar value for GDP in 2000 that was $2 billion higher. Statistics Canada, however, also revised the price deflator. I am grateful to Bruce Little, business reporter at the Globe and Mail, for pointing out to me that the real value for 2000 (constant 1997 dollars) "was not revised up by $2-billion from the figure released last April. It was revised down from $124.464-billion to $124.187-billion." How could that be? The answer lies in changing the price deflator. Either way, the economy peaked in 2000. With the new "Chain Fisher Index" the 1997$ GDP for 2000 was revised to $124.187-billion while the 2001 figure was revised to $123.912 billion." Consequently, real growth for 2001 changed from a positive 0.9% to slightly negative as my article reported using the old index. Using either price deflator, the BC economy peaked in 2000.

It costs $400 to purchase the complete set of revised provincial economic accounts from Statistics Canada http://www.statcan.ca/Daily/English/021107/d021107b.htm. Your free web service won't be analyzing all those data unless more people respond to the appeal for support - see http://www.StrategicThoughts.com/support.html.

Limited free data are provided by Statistics Canada. The revised GDP data in current dollars are available at http://www.statcan.ca/english/Pgdb/econ15.htm. The constant 1997$ series is available at http://www.statcan.ca/english/Pgdb/econ50.htm BUT while the free current dollar series reports the revised data, as of November 11th, the free constant dollar data are still unrevised (unrevised GDP and unrevised price deflator).

Students of business cycles know that the debate over their existence and length depends on what statistical techniques are used to remove the long term growth trend from the data. The lesson from such exercises is, like the example of price deflators, that the data are frequently not sufficiently robust to support sophisticated analysis.

A regular reader of these columns commented on my November 9th article's reference to the index of help wanted ads. Statistics Canada's latest release noted "The index for Manitoba is not available for October because of the Winnipeg newspaper strike." The reader suggested that the BC data might also have a higher error because of the dispute at the Times Colonist. The Victoria metropolitan area is certainly important, but it is not as large a portion of the population of BC as the Winnipeg area is to Manitoba. The index weights each newspaper's contribution by the 1996 metropolitan area population and imputes the value if the paper is not available. Consequently, some error might be introduced with the absence of the Times Colonist but not enough to justify omitting the index for BC. The help wanted index for BC has declined since July (3 consecutive months).

November 9, 2002

BC Economy Peaked in 2000

Statistics Canada recently revised its estimates of gross domestic product (GDP) by province. The revision produced a story in the Globe & Mail with the headline "B.C. economy shrinks for first time since '82". It is true that as a result of the revision by Statistics Canada, BC's 2001 GDP growth after inflation went from a positive 0.9% to slightly negative but that is not due to any downward revision for 2001 GDP. It is because the estimate for 2000 was revised upward by $2 billion. In the last full year under the NDP, B.C.' economy grew by 7.2% (or 5.3% after inflation). That also means that real per capita GDP increased by 4.5% in 2000 rather than the previous estimate of 3.1%. Real per capita GDP is the key indicator in the Campbell government's strategic plan. It declined in 2001 and will probably show a slight decrease again in 2002. That must be frustrating for Premier Campbell but it is far more frustrating for families throughout British Columbia.

In addition to its revision of GDP estimates, Statistics Canada has released other estimates that must cause concern as Finance Minister Gary Collins prepares to release his Second Quarter Report later this month. On a seasonally unadjusted basis, employment in BC dropped by 14,600 in September and it fell by another 18,100 in October. It doesn't ease the pain for those families to know that when seasonally adjusted those numbers are changed to an increase of 1,300 for September and a drop of 2,900 for October. The help wanted index for BC, a measure of jobs advertised in newspapers, dropped to a level not seen since the recession of the early 1980s.

The Campbell government has been fond of pointing to robust growth in retail trade but that too has hit the skids in recent months. In August growth in retail trade was only 4.8% compared to a growth rate of 6.4% for all Canada. BC suffered a slight decline in retail trade between July and August adding to the decline that July showed relative to June. The estimate for September will be out on November 22nd - about the same time Collins releases his revised forecast for the second half of fiscal year 2002-03.

Construction has been a bright spot in the BC economy. On November 6th Statistics Canada released estimates for the value of building permits. For the period January through September this year compared to last, the value of residential building permits increased by 38.3% in BC compared to 35.2% for all Canada. Non-residential construction was not so good. "Growth" in BC showed a decrease of 26% compared to a decrease for all Canada of 6.5%.

It is fair to point to the softwood dispute, the impact on tourism from 9-11 and the 2001 recession when explaining why BC's economy is sputtering. Of course, when Gordon Campbell was in opposition, all economic ills were somehow blamed on the provincial government. Premier Campbell asked that a standard of relative performance be used to judge his government. His strategic plan says "Our goal is for British Columbia to have the best performing economy and the highest quality of life in North America." If the economic forecast by the Bank of Montreal is any indication, Premier Campbell has a long way to go. That forecast placed BC dead last in its estimates of economic growth for 2003 and 7th amongst the provinces for 2004. Seniors who are being kicked off Pharmacare, booted out of residential care and discharged from hospital with no place to go probably question whether their quality of life has improved in the New Era. We can all ask "when will those tax cuts pay for themselves?"