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Canada: Real Gross Domestic Income Contracts In Q2!

ByThe National Bank of Canada
Published 09/02/2012, 05:58 AM
Updated 05/14/2017, 06:45 AM
GDI
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The Canadian economy continues to expand, but for some reason, it seems that the same percentage point of real GDP is not providing the same degree of income as it used to. What’s happening? Real gross domestic income (GDI) is weakening. Real GDI is a measure that combines the change in production (such as GDP) with the change of purchasing power of that production on world markets (terms of trade).

As Friday’s Hot Chart shows, real GDI in Canada actually contracted 1.6% in Q2, the first decline since the 2008-2009 recession. This is an important development that is impacting both the domestic economy as well as government revenues. As shown, Canada had become accustomed to see its GDI rise more rapidly than GDP (a boon for our country).

The deteriorating global economy, however, means that this is unlikely to be the case for the next few quarters – a development that will negatively impact public finances. Finance Minister Flaherty is right to warn of against the downside risks to the fiscal outlook.
Real Gross Domestic Income Contracts In Q2

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