Posted at 8:00 a.m.
How is the economy’s GDP calculated? Where does the data come from?
Yves Champagne
To answer this question, The Press appealed to the skills of Pascal Bédard, who is a lecturer in the Department of Applied Economics at HEC Montréal.
What is GDP?
“GDP is the gross domestic product of an economy in a given territory; most often a country, but also a province or an internal state, or an international grouping of countries. GDP is the measure of the total economic output of that territory. Its upward or downward trend serves as a basic indicator of the state of the economy: in a cycle of growth, in stagnation, or in a cycle of decline such as during a recession”, explains Pascal Bédard.
PHOTO VALÉRIE PAQUETTE, PROVIDED BY HEC MONTRÉAL
Pascal Bédard, lecturer in the Department of Applied Economics at HEC Montréal
Furthermore, you should know that there are two main forms of GDP. There is the so-called “nominal” GDP because it is compiled in current dollars, without adjustment for inflation. There is the so-called “real” GDP because it is calculated in constant dollars – since 2012 – in order to represent the real variations in volumes and production values, without the distortion caused by inflation on income figures and current expenses.
This distinction between real GDP and nominal GDP becomes more important in times of increased inflation such as what we are currently experiencing in Canada and the United States.
Pascal Bédard, lecturer in the Department of Applied Economics at HEC Montréal
Recent examples? The Quebec economy ended 2021 on a strong recovery with GDP growing by 6.2% in real terms (excluding inflation at 3.8%), but at just over 13% in nominal terms , including inflation. For 2022, forecasts for Quebec’s economy currently point to around 3% real GDP growth, while nominal GDP growth is expected to be close to 8.5% due to increased inflation. around 5.5%.
Where does the GDP data come from?
“There are two main categories of data used by Statistics Canada: GDP based on total income and GDP based on total expenditure. However, it is the GDP based on total expenditure that is most used for economic analysis purposes,” explains Pascal Bédard.
These income and expenditure data come from the three main sectors of economic activity: consumers (approximately 60% of GDP), businesses (approximately 20% of GDP) and the various levels of government (approximately 20% of GDP).
Statistics Canada collects these revenue and expenditure data from a very large sample of businesses and governments.
What is the use of GDP?
“For the population in general, the measurement and evolution of the GDP of the economy do not really have any direct importance on a day-to-day basis, believes Pascal Bédard. At best, it can serve as a general indicator of the state of the economy in order, for example, to allow people looking for a job or better working conditions to better gauge job prospects in their sector. ‘activity. »
But for socio-economic policy analysts and decision-makers, Bédard points out, it’s usually measures derived from GDP that are most useful.
“Take GDP per capita, for example. As a general rule, growth in GDP per capita corresponds to an increase in citizens’ income, which facilitates their access to goods and services that can improve their quality of life,” explains Pascal Bédard.
“On the other hand, there are plenty of nuances to consider in this cause and effect relationship between the increase in GDP per capita and the quality of life of the population concerned. For example, what are the advantages of a high GDP per capita in a population where income inequality or crime rates are also very high? »
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