With more than $300 billion in government stimulus in 2021, based on initial numbers showing weaker economic growth, experts are now questioning the accuracy of those early estimates.

Recent revisions from Statistics Canada indicate that the economy has grown faster than originally thought, raising concerns about how much reliance can be placed on data that may change in the future — especially when it influences critical fiscal and monetary decisions. including government spending and quantitative tightening/easing.

The November GDP revisions raise concerns among stakeholders

Earlier this month, Statistics Canada released revised GDP figures from 2021 to 2023, showing a significant upward swing in the data.

“The past three years have been revised up by a cumulative 1.3 percentage points,” says Douglas Porter, chief economist at BMO.

Revised GDP growth for 2023 is 1.5%, up from 1.2%; for 2022, it is 4.2%, up from 3.8%; and for 2021, it is 6.0%, up from 5.3%.

“The firmer growth makes the per capita story a little less painful over the past three years,” Porter noted. “The 2023 level is now exactly in line with 2019 (instead of falling 1.3% over that period). Still bad, but less awful.”

Statistics Canada released revised GDP data in four different periods: monthly by industry, monthly, quarterly and annually. Each revision incorporates additional data, with annual revisions usually bringing the most significant changes due to their comprehensive nature.

In an email to Canadian Mortgage TrendsStatistics Canada explained its revision process: “Statistics Canada regularly updates its figures for gross domestic product (GDP)… These more comprehensive and detailed data sets include all annual business surveys as well as administrative sources such as would be public accounts for all levels of government and business and personal tax data. “

While revisions to GDP data are not unusual, experts are concerned about a gap of nearly a year in GDP, especially since both the federal government and the Bank of Canada rely on these estimates to make critical spending and policy decisions.

“All of this means that the Canadian economy was actually … stronger than previously reported and calls into question whether we need ‘big 50 bps rate cuts,'” says economic commentator Ryan Sims. “If StatCan has effectively missed an entire year of GDP growth over the past three years, what else have they missed? Should we expect inflation and employment to be revised by a wide margin as well?”

Pandemic-related factors contributed to unusually large GDP revisions in 2021

Statistics Canada publishes and reviews GDP data in four installments: monthly GDP by industry, monthly GDP released 60 days after the month (MGDP), quarterly GDP by income and expenditure 60 days after the quarter (QGDP) and final annual supply and use update tables (SUTs).

As StatCan explains, “SUTs are compiled 34 months after the reference year, using data from annual surveys and administrative sources to create the most comprehensive and detailed statistics.” These updates, made 34 months after the year in question, help explain the unusually large discrepancy in the 2021 GDP revision.

“The 2021 GDP growth rate update is higher than usual,” the statistics agency said. CMT. “This is due to a more complete picture of the impact of the pandemic, as all datasets have now been incorporated. The higher-than-normal revision is attributed to unprecedented events, including supply chain disruptions and increased government support for businesses and households during the pandemic recovery.”

In response to COVID-19, the Canadian government has injected more than $300 billion into the economy, including relief programs such as the Canadian Emergency Wage Subsidy (CEWS) and the Canadian Emergency Response Benefit (CERB).

The data review is not unique to Canada, the US has led the way

While such significant data revisions are unusual, they are not unique to Canada. In fact, the United States revised its economic data long before Canada decided to follow suit.

“It’s just amazing that over the years, whatever the Americans do, we do, and lo and behold, the Americans have been doing GDP revisions even before StatCan decided to do theirs,” said Bruno Valko , the vice president of national sales at RMG Mortgages. CMT.

Through the end of 2023, US real GDP growth has been revised upward by a cumulative 1.2%, with upward revisions to growth in each of 2021-2023.

“With the influence the US has on our economy and given the implications, perhaps Statistics Canada used the revised US numbers to adjust our GDP upwards as well,” he added. “I’m not sure that’s the case, I’m just speculating that it might be.”

For context, Valko compiled data on how the Bureau of Labor Statistics (BLS) made sweeping revisions to its jobs numbers, specifically the 2023 and current year-to-date adjustments.

Valko noted that these major job revisions are particularly “frustrating” for those in the mortgage industry.

“When the headline number came out (saying) 254,000 jobs (were added) … bond yields and Treasury yields in the West went up,” he said. “And of course Canada is next. And it’s frustrating because (you’re left wondering) is this a real number?”

That said, Valko does not believe these 2021 GDP revisions have major consequences for the Bank of Canada at this stage.

“I think the Bank of Canada is focused on looking ahead and assessing whether they’re behind the curve on interest rates,” he said. “Our economy is struggling and while you can review 2021, 2022 and 2023, what about now?”

Visited 60 times, 60 visits today

Bank of Canada Bruno Valko Douglas Porter GDP REVIEW static Static GDP StatCan reviews statistics canada Canada GDP statistics

Last modified: November 17, 2024