The Daily — Gross domestic product, income and expenditure, fourth quarter 2021 (2024)

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Released:2022-03-01

Real gross domestic product (GDP) grew1.6% in the fourth quarter of2021, following a1.3% rise in the third quarter. Real GDP posted a strong4.6% growth in2021, after the COVID-19pandemic-induced decline (-5.2%) in2020. Final domestic demand rose0.7% in the fourth quarter of2021, after rising1.7% in the previous quarter.

Growth in real GDP was driven by business investment in engineering structures (+3.5%) and home ownership transfer costs (+14.3%), which include commissions and land transfer taxes associated with home resale, and by an accumulation of inventories. Increases in international exports were overshadowed by larger increases in imports. Rising prices moderated growth in household final consumption.

Accumulation of business non-farm inventories (+$11.0billion) was a major contributor to growth during the fourth quarter, driven by manufacturers and wholesalers. Manufacturers of non-durable goods accounted for the bulk of the inventory increase of the sector, with a smaller accumulation of durable goods inventories.

Wholesale inventory accumulation of durable goods was quite strong in the fourth quarter, and non-durable wholesalers added to the build-up as well. Inventory held by retailers decreased again, but at roughly half the level of the third quarter. In addition, several categories of both durable and non-durable goods were drawn down in the fourth quarter.

Overall, non-farm inventory accumulation kept the real economy-wide stock-to-sales ratio stable at0.829, the same as in the third quarter. This was still below the0.842average for2018and2019and was most evident in the record-low stock-to-sales ratio of retail motor vehicle dealers.

Growth in international trade for both exports (+3.2%) and imports (+3.4%) was primarily driven by motor vehicles and parts, and in travel services. Increased motor vehicle production after the slowdown caused by motor vehicle parts shortages, combined with high demand domestically and externally, led to14.0% growth in exports and12.7% growth in imports. As countries loosened restrictions, there was a marked increase in travel for the second consecutive quarter.

Household spending and residential construction the largest GDP contributors to2021

Large gains in household spending on food and beverage services and clothing in2021reflected re-opening of the economy, as activities outside the home increased. Moreover, working from home, savings from less travel and low mortgage rates fostered spending on housing. Across the country, new home construction, resales and renovations increased at near-record levels in2021. Household mortgage debt was up10.3% in2021, an unprecedented increase of $182.4billion.

Terms-of-trade improves and gross domestic product implicit prices rise

The terms-of-trade (ratio of price of exports to price of imports) rose1.0%, primarily because of a12.5% increase in prices of exported crude oil and crude bitumen in the fourth quarter. In2021, terms-of-trade rose by14.0%, again reflecting an81.7% increase in prices of exported crude oil and crude bitumen.

The GDP implicit price index, which reflects the overall price of domestically produced goods and services, increased1.6% in the fourth quarter. Record growth in residential and non-residential construction prices and in the price for exported goods in2021pushed the GDP implicit price index up8.2%, the highest since1982. The price increase was exacerbated by higher production costs due to supply chain disruptions and increased housing demand.

Compensation of employees rises

Compensation of employees rose1.9% in the fourth quarter, following the2.9% rise in the third quarter. In2021, compensation was9.1% higher than in2020.

The major contributors to wage growth in the fourth quarter were professional and personal services, finance, real estate and company management, and construction. Contributors varied by region, reflecting the diverse nature of employment across the country. After a solid third quarter, Yukon posted strong growth in the fourth quarter. Newfoundland and Labrador was the only region with a decrease in the fourth quarter.

After a decrease in2020, the $77.0billion gain in wages in2021compared with2019was felt in all regions except Alberta. Wages in Alberta for2021remain lower than in2019, primarily due to the professional and personal services industry and the mining, oil and gas industry remaining below pre-pandemic levels. The strongest wage gains for2021compared with2019were in British Columbia, led by the health care industry; Prince Edward Island, mostly due to the educational services industry; and Yukon, due to the mining, oil and gas extraction industry.

Household disposable income and savings rate drop

Household disposable income was down1.3% in the fourth quarter, the second consecutive quarterly decline, primarily due to an11.9% decrease in government transfers to households. Government transfers to households as a proportion of disposable income fell to19.1% in the fourth quarter, marking a return to pre-pandemic shares of less than20%.

Continued easing of pandemic-related restrictions, despite the arrival of the Omicron variant late in the quarter, helped boost nominal household consumption by1.3%. With less disposable income and higher expenditures, households were left with smaller net savings—$23.0billion at quarterly rates—a level that, despite the notable decrease, was more than double that of the last quarter of2019. Consequently, the savings rate dropped to6.4% in the fourth quarter from9.0% in the third quarter, falling to single-digit territory in the latter half of2021after five consecutive quarters of savings rates in excess of10%. The household savings rate is aggregated across all income brackets. In general, savings rates are higher for higher income brackets.

Support and recovery programs remain sizeable contributors to government expenditures, but their footprint has diminished

Overall, government revenues rebounded11.4% in2021, after a2.2% decline in2020. At the same time, expenditures decreased1.9% in2021, as support measures such as the Canada Emergency Wage Subsidy and Canada Recovery Benefit wound down in the fourth quarter of2021. This was a reversal of the story from the previous year when support programs initially rolled out and government expenditures rose23.8%. Still-elevated expenditures, representing roughly45% of nominal GDP in2021, balanced against growing revenues, meant that total government remained in a sizeable net borrowing position in2021. However, by the fourth quarter of2021, net borrowing had fallen considerably to $11.8billion at quarterly rates from a record-high $114.8billion in the second quarter of2020and $44.9billion in the second quarter of2021.

Non-financial corporations remain in net lending position

Non-financial corporations were in a net lending position throughout2021as the economy rebounded. Net operating surplus rose35.5% after a decline in2020. Some industries, such as those engaged in energy-related activities, also benefited from rising prices.

Continued growth among financial corporations

Financial corporations recorded a strong year of growth, with net operating surplus up15.9% in2021after weaker growth in2020as chartered banks and financial investment related firms, such as portfolio management companies, recorded notable gains. Increased investment activity and strong mortgage lending bolstered revenues despite lower interest rates. Household demand for financial services mirrored this trend, with investment-related expenditures and explicit fees recording double-digit increases in2021compared with2020. Net operating surplus rose5.0% in the fourth quarter, extending a string of consecutive growth since the second quarter of2020, when the initial effects of the pandemic constrained activity.

Products

The data visualization product "Gross Domestic Product by Income and Expenditure: Interactive tool," which is part of Statistics Canada – Data Visualization Products (Catalogue number71-607-X), is now available.

The document, "The2018to2020revisions of the Income and Expenditure Accounts," which is part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is available.

The document, "Recording new COVID measures in the national accounts," which is part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is available.

The Economic accounts statistics portal, accessible from the Subjects module of our website, features an up-to-date portrait of national and provincial economies and their structure.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is available.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

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