Gross Domestic Product

For Canada, 1999 marked the eighth consecutive year of economic growth in what is emerging as one of the longest and most stable expansions of the postwar era.

Real gross domestic product (GDP) growth in Canada increased to 4.5 percent in 1999, up from 3.3 percent in 1998. On a quarterly basis, real GDP grew sharply in the last two quarters of 1999, increasing to 6.5 percent and 5.1 percent, respectively, and with a continued growth of 4.9 percent in the first quarter of 2000.

The substantial increase in Canada¡¯s production in 1999 was boosted by the strength in both domestic and foreign demand. Growth in total domestic demand strengthened to about 4.3 per cent, with particularly sharp increases in machinery and equipment, and inventory investment.

Business investment in plant and equipment increased by 9.4 percent over the same period. Investment in both machinery and equipment and non-residential construction also grew significantly, at 15.6 percent and 2 percent, respectively, while residential construction increased by 6.6 percent in 1999, after experiencing a 2 percent decline in 1998. Increased housing starts boosted new construction activity while renovations also registered a substantial gain.

Meanwhile, consumer expenditure increased by 3.5 percent in 1999. The increase in spending on durables such as automotive products, and furniture and appliances, as well as on services, continued at a strong pace.

Inflation

Underlying price and cost pressures remained subdued in Canada in 1999, with consumer price inflation (growth in the CPI) averaging 1.7 percent. The CPI inflation rose to 3.0 percent by March 2000, owing in large part to the impact of higher energy prices, but eased back to 2.1 per cent in April 2000. Core CPI, which excludes food, energy, and the effects of indirect taxation, meanwhile, remained at a low 1.3 percent last April. For 2000 and 2001, private/business sector forecasts for the CPI inflation would be to average near the mid-point of the inflation target bands of 1 to 3 percent set jointly by the government and the Bank of Canada.

Employment

Canada is currently experiencing its lowest level of unemployment in 24 years. With over 427,000 net new jobs created in 1999 and a further gain of 115,000 so far this year net job creation has reached over 542,000 since the end of 1998. Full-time jobs have increased substantially while part-time jobs have fallen as a proportion of employment. Canada¡¯s unemployment rate in April 2000 remained at 6.8 percent (for the fifth consecutive month), the lowest since April 1976. Forecasts are for this rate to decline further through 2001.

Trade

International trade played an important role in sustaining Canada¡¯s economic growth in 1999. As shown in Table 1, exports of goods and services increased by 11 percent to reach Cdn $412.4 billion, equivalent to 43 percent of GDP. Imports of goods and services increased by about 7.1 percent to reach Cdn $384.6 billion or around 40 percent of GDP. In real terms, 1999 exports and imports grew by 10.02 percent and 9.4 percent, respectively, with the merchandise trade balance representing 3.5 percent of GDP in 1999, an increase from 2.1 percent of GDP in 1998.

Table 1: Trade as a per cent of GDP, 1989-1999

On a regional basis, exports to the United States grew strongly as the expansion in the U.S. continued unabated. The share of the U.S. in Canada's merchandise exports rose from 83.6 per cent in 1998 to 85.9 percent in 1999. Exports to Japan declined, despite a temporary boost in the Japanese growth due to massive fiscal stimulus in the first half of the year. The effects of said stimulus rapidly dissipated in the second half of the year, leaving growth in the Japanese economy flat for 1999 as a whole. Sales to the European Union, on the other hand, picked up moderately, as growth in major Western European economies firmed up.

Exports to most other major markets were, for the most part, down during the year. The strong rebound in East Asia in 1999 did not make itself felt in terms of Canadian exports to the region. There were a few bright spots, however, as exports to Korea (up by 8.3 percent) and to the Philippines (up by 13.9 percent) increased substantially over the past year. Merchandise exports to most major Latin American destinations declined in 1999 as the region weathered recessionary conditions. Of note, however, were the growth in exports to Canada¡¯s free trade partners in the region, Mexico (up by 10.9 percent) and Chile (up by 4.8 percent), thereby partially offsetting these declines.

On a sectoral basis, the highlight of 1999 was the steep growth in automotive sector exports. This sector experienced one of its best export years ever, with international sales rising by 24.2 per cent, increasing this sector's share of total Canadian merchandise exports to 26.7 percent. With this performance, the automotive sector regained its historic position as Canada¡¯s leading major export sector, displacing "machinery and equipment", which had nosed ahead in 1998. Energy sector trade also experienced a sharp rise, largely due to rising oil prices.

The continued decline on an annual average basis in the price of metal products resulted in a drop in the value of industrial goods and materials trade, notwithstanding volume gains. With regard to services trade, the strongest growth was recorded in commercial services where expansion ontinues to be driven by key knowledge-based commercial services.

The rapid expansion of imports allowed the economy to maintain its capacity to meet growing demand and to continue the retooling needed to remain competitive in the "e-age." In regional terms, Canada¡¯s import growth in 1999 was broadly based, with robust growth in imports recorded from the U.S. as well as from Europe and Asia. Sectorally, import growth was led by purchases of consumer and auto products. Commercial services and investment-related goods also performed well. The sharp rebound of international oil prices, which was beneficial to Canada on the whole since it is a net energy exporter, led to a steep rise in the oil import bill for Canadian net importing provinces.