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Canada: Nominal GDP to Support Public Finances

ByThe National Bank of Canada
Published 03/04/2012, 01:06 AM
Updated 05/14/2017, 06:45 AM

Canada’s GDP report for the fourth quarter was good not just in real terms, with GDP growing 1.8% annualized on top of an upwardly revised Q3 growth of 4.2%, but also in nominal terms. The less-watched (and often neglected) nominal GDP grew at an annualized pace of 6.3% in that final quarter, the best print since Q1, contrasting sharply with the 3.9% increase in the U.S. That extends the relative outperformance of Canada versus the U.S. in terms of nominal GDP growth, a trend that started back in 2007. As today’s Hot Chart shows, a much improved terms of trade, now at its highest since Q3 of 2008, is contributing to Canada’s growth in revenues and hence nominal GDP. With the denominator soaring, that should keep the oft-mentioned Debt to GDP ratio under wraps this side of the border. Moreover, for public finances, it’s nominal GDP that counts, not real GDP. So the relative outperformance in its nominal GDP puts Canada in a better position than others to generate revenue and tackle the budget deficit problem.
Canada Nominal GDP to support public finances

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