Starting today, StatsCan will issue a comprehensive revision to economic data of the past 30 years. It’s introducing new measures, as well as changing the definition of others.
The exercise—two years in the making and designed to comply with revised international standards of economic measurements set out in 2008—will put Canada in the forefront of nations in adopting the new way of measuring economic performance.
Others have pledged to follow, with the U.S. doing so in 2013 and Europe planning to fall in line in 2014.
But, though it’s a major step, economists say it won’t change the way Canadians feel about their economic place in the space at present, or in the past.
Some gross domestic product numbers will likely move marginally up, in part because research and development will be capitalized and some services will be added to the export tally.
In broad terms, however, StatsCan is not rewriting the past. The new data will still dutifully record the slumps of the early 80s and 90s, the growth spurts that followed, and the great recession of 2008-09 and tepid recovery since.
“There’s no real change in the economic history of Canada,” says Jim Tebrake, Statistics Canada’s director of the income and expenditure accounts division.
“There are changes from quarter to quarter, but nothing of significance. The business cycle is still the business cycle.”
The value of the exercise, says Toronto-based Paul Jacobson, is to give economic policy-makers and analysts a more precise picture of the ebb and flow of economic movements.
CIBC chief economist Avery Shenfeld agrees but says it will take some getting used to, having compared it to the transition from Fahrenheit to Celsius.
The comparison is somewhat apt because one of the benefits will be that countries, once they’ve followed suit, will more easily be able to stack their economies and component parts against each other.
But even economists will need some time to adjust, Jacobson says, adding that he has arranged for a four-hour seminar on the subject later in the month.
“I’ve been warning people for months this is going to be a biggie, but not everybody’s been paying attention.” he says. “Every single identifier people are using is changing.”
Total exports, for instance, is currently broken down into seven groupings. Following the change, there will be 35. For personal expenditures, StatsCan plans to issue 100 sub-groupings for analysts to ponder, instead of the previous 38.
The business sector will be split between financial and non-financial corporations, and household income will become more precise after jettisoning tribal government activity, non-profit institutions, and other sectors that really had little relevance to households. Now they will have their own category.
“It’s a much purer and clear measure,” Teblake explains.
The changes include re-definitions of categories and new terminology. For instance, terms such as corporate profits, labour income and personal expenditures will be no more.
Analysts say one impact is forecasters will need to re-adjust their models to incorporate the new definitions, categories and adjusted GDP results.
Shenfeld insists the changes are unlikely to impact the market or the Bank of Canada’s thinking about monetary policy, though.
“If real GDP growth has been faster than we thought, Canada’s productivity performance hasn’t been as worrisome as feared,” he explains in a note issued to clients Friday.
At the same time, he said changes in the definition of the household sector could result in Canadians realizing they are even more in debt on average than they thought.