Oil Shock Wasn't as Bad for Canada's Economy as Initially Feared

  • GDP was C$24 billion more than thought between 2014 and 2016
  • Statistics agency to officially release revised data next week

Oil sands near Fort McMurray, Alberta.

Photographer: Ben Nelms/Bloomberg

It seems Canada weathered the oil collapse better than previously thought.

Numbers recently published on Statistics Canada’s online database show that between 2014 and 2016, the nation’s economy generated C$24 billion ($19 billion) more output in nominal terms than first estimated, according to Bloomberg calculations. The agency’s fully revised data will be officially released on Dec. 1, along with a report on third quarter 2017 gross domestic product.

Nominal GDP201420152016
Billions of C$ (Current)
Preliminary1,983.11,986.22,027.5
Revised1,990.21,994.92,035.5
Difference+7.1+8.7+8.0

In real terms -- which adjust the numbers for inflation and are the more conventional marker of economic activity -- the update shows Canada’s growth rate over the three-year period averaged 1.8 percent, compared with a previous estimate of 1.7 percent.

Change in Real GDP201420152016
Percentage Change (YoY)
Preliminary2.6%0.9%1.5%
Revised2.9%1.0%1.4%

The revisions may suggest to Bank of Canada policy makers there’s even less slack in the economy than currently assumed, which could have implications for interest rates. They also reveal an economy with a better mix of economic activity, since the changes were driven by greater-than-expected business investment, mainly construction-related.

“The hit to the economy from the oil price shock was not as severe as initially estimated,” Philip Cross, a research analyst with the Macdonald-Laurier Institute and former official at Statistics Canada.

The update is part of annual revisions of GDP figures, and the changes aren’t very large by historical standards, particularly given the shock to the economy, Cross said. “The potential was there for a much bigger revision.”

Election Issue

Even with the upward revisions, the data still illustrate an economy that went through tough times as oil prices plunged. The 1.2 percent average growth rate in 2015 and 2016 remains the slowest two-year pace outside a recession in at least six decades.

The economic slump that began at the end of 2014 became an important campaign issue during the 2015 election that saw the Conservatives under Stephen Harper lose power to Prime Minister Justin Trudeau’s Liberals.

In the middle of the campaign, the statistics agency reported GDP declined in the first two quarters of 2015, providing fodder for opposition leaders who claimed the economy had fallen into a recession.

The full quarterly revisions -- including any changes to 2017 data and the 2015 numbers that showed back-to-back contractions -- will be published next week. Statistics Canada issued some of the revised GDP numbers on an annual basis in its Nov. 8 provincial economic accounts release.

Here are the details on the revisions made to real GDP:

YearGDP ConsumptionGov.Invest.ExportsImports
Billions of C$
Preliminary
20141,753.7983.5337.8414.9555.7575.2
20151,770.21,002.3342.8396.0574.6577.1
20161,796.21,026.2349.5383.8580.6571.9
Revised
20141,758.6982.8337.0421.1556.6575.8
20151,776.31,003.4342.3399.5575.9580.0
20161,801.41,027.1350.0387.7581.7574.3
Difference
20145.0-0.7-0.96.20.90.6
20156.11.1-0.53.41.42.9
20165.20.90.53.91.12.4
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