The last recession felt like the economy toppled off a cliff – but new estimates show that cliff was higher, and steeper than previously thought.
New revisions show Canada's economy was sturdier than previously thought just before the last downturn – even as the U.S. was sputtering – but when the fall came, it was more painful than earlier data had indicated.
"Instead of a picture of an economy levelling off, and then plunging, instead we get whip-lash," said Philip Cross, research co-ordinator at the Macdonald-Laurier Institute and Statistics Canada's former chief economic analyst. "We go from very good growth in the third quarter of '08 to a free fall."
Though Canadian growth in the second and third quarters of 2008 has been revised upwards, the economy's slide in the next half year is more stark than prior estimates. The new estimates reflect revisions by Statistics Canada of more than 30 years of economic data to bring the country in line with international standards.
The big picture shows little change after the revisions, with GDP growth and economic cycles looking more or less the same. The details, though, sharpen our understanding of the economy, in particular the last downturn.
The revisions touch everything from gross domestic product data to productivity, provincial economic accounts and the balance of payments.
They align the Canadian system with 2009 international standards set out by bodies like the United Nations and International Monetary Fund. The U.S. will release its changes based on the new standards next year.
The first set of changes, out Monday, show the big picture is little altered – the depth or length of the economic contractions that happened in 1982 and 1991 were little changed, the agency said, while the drop in the past recession was more "pronounced" than previously estimated.
Revisions to GDP growth over the whole period were "not substantial," Statscan said. On balance, the economy was a little stronger than prior estimates, with a mean revision to the annual real GDP growth rate of 0.14 percentage points.
The overhaul aims to make Canada more comparable with other countries, and give a more complete and detailed picture of the economy, said James Tebrake, director of Statscan's income and expenditure accounts, who is overseeing the revisions.
For example, the role of the financial sector and non-profits in the economy will be easier to track. Details on household expenditures and intellectual property investments along with imports and exports will be clearer, he said in an interview.
Changes show household savings were slightly weaker than previously reported, declining from 1981 to 2005 although since inching higher.
The new breakdown gives a better understanding of household income, spending and borrowing, noted David Madani, Canada economist at Capital Economics. "The latter still shows that households are heavy net borrowers, the opposite to their normal role as net savers in the economy."
Recent quarters, meantime, look a bit stronger than estimated.
"The revisions imply a slightly faster pace of growth in recent quarters," noted RBC economists. "This greater momentum may prompt some upward revisions to 2012 GDP forecasts."
The changes go back to 1981. Statscan is now working on revisions back to 1961.
A clearer picture of how the revisions affect productivity and household balance sheets will come when Statscan releases its data on each later this month.