Gross Fixed Capital Formation
Concepts

Total value of acquisitions, less disposals, of fixed assets during the
accounting period, plus certain additions to the value of non-produced assets
owing to the productive activity of institutional units.

Fixed assets are tangible or intangible assets which are produced as outputs
from production processes and which are themselves used repeatedly or
continuously in other production processes for more than one year.
Tangible Fixed Assets

Acquisitions, less disposals, of new and existing tangible fixed assets, sub-divided by
type of asset into:
 Dwellings;
 Other buildings and structures;
 Machinery and equipment;
 Cultivated assets – trees and livestock - that are used repeatedly or continuously to
obtain products such as fruit, rubber, milk, etc.
Intangible Fixed Assets
 Aquisitions, less disposals of new or existing intangible fixed assets, subdivided by type of asset into:
 Mineral exploration;
 Software;
 Entertainment, literary or artistic originals;
 Other intangible fixed assets.
Others
 Major improvements to non-produced tangible assets,
including land.
 Costs of transfers of ownership of produced and nonproduced assets.
Gross Fixed Capital Formation
Business and Government
 Three main categories:
 Residential Construction
 Non-Residential Construction
 Machinery and Equipment
Business Residential Construction
Millions of dollars
2003
2004
2005
2006
New Construction
36724
42136
43927
47652
Alterations and
Improvements
24209
27100
30270
33631
Transfer Costs
11781
13682
15594
17103
Total
72714
82918
89791
98386
New Residential Construction
 Singles, doubles, rows and apartments – (Work-put-in-place)
 housing starts – Central Mortgage and Housing Corporation ( CMHC )
 average value of building permits – Building Permits Survey
 work put in place coefficients
Other New Construction
 Cottages, mobile homes and conversions
 Building Permits Survey

Supplementary costs
Goods and services Tax
Provincial Sales Tax
Land developer fees
Other supplementary costs
Data published on a monthly basis by Investment and Capital Stock Division ( ICSD)
Alterations and Improvements
 Included are all works that improve the quality of the dwelling and extend its
service life
e.g. - replacement of carpets
- replacement of roof
- installation of fixed electrical home appliances
 Repair work is recorded in personal consumer expenditures under services.
Alterations and Improvements
(Annual Estimates)
 National and provincial annual estimates
 Renovation expenditures undertaken by:
Owner – occupants
Landlords
Cottage owners
Renters
 Survey of Household Spending –SHS
 Homeowners Repairs and Renovations Survey - HRRS
Alterations and Improvements
Billions of dollars
35
30
25
20
15
10
5
0
2001
2002
Famex/SHS
2003
HRRS
2004
2005
IEAD
FAMEX /SHS – Family Expenditure Survey or Survey of Household
Spending
HRRS – Homeowners Repair and Renovations Survey (discontinued in 2002)
IEAD – SNA estimate
Alterations and Improvements
(Quarterly Sources)
 Building permits for renovations (source: ICSD )
 Sales of building materials such as
 building supplies,
 metal products,
 lumber and millwork.
( source: Wholesale Trade Survey )
 And information for home furniture stores, home centres and
hardware stores and other building material and garden equipment
dealers. (source: Retail Trade Survey )
Ownership Transfer Costs
 Annual sources of data:
 Real Estate Agents and Brokers Survey
 Multiple Listing Service – MLS
 Survey of Household Spending – SHS
 Quarterly source
 Multiple Listing Service – MLS
 the number of units sold and
 the average sale price.
Deflation
 New residential construction
 New House Price Index – NHPI excluding land (Prices Division)
 Single family dwellings
 Semi-detached dwellings
 Row houses
 Apartment Building Construction Price Index
 Apartments
Deflation
 Alterations and Improvements:
 Renovations Price Index (estimated in IEAD)
 Cost of Labour ( 60% ) ( Survey of Employment, Payrolls and
Hours)
 Cost of Materials ( 40% ) ( Materials by type such as lumber,
pipes, etc. )
 Transfer Costs
 Indexed average selling price of existing homes sold from Multiple
Listing Services (MLS)
Non-Residential Construction
 New non-residential construction (work put in place)
 Additions and major renovations
 Conversions and alterations that extend the life of an existing asset
 Transfer costs
 Capitalized costs (architectural, legal and engineering fees and interest)
Total Non-residential Construction
2003
2004
2005
2006
Buildings
27237
29867
32388
35914
Engineering
47029
53477
65175
78056
Highways
7303
7693
9283
10650
Railways
905
970
1172
1338
38821
44814
54720
66068
74266
83344
97563
113970
Millions of Dollars
Other engineering
Total
Business & Public Administrations
 Two categories
 Building construction
e.g. hotels, office buildings, railway stations, schools and shopping centres
 Engineering construction
e.g. bridges, roads, highways, waterworks, sewage systems, airports,
transmission lines, oil well drilling, mine development, railway tracks, etc.
Sources of Data
Annual sources of data
 Input/Output tables
 Capital Expenditure Survey (CES), Actual, Preliminary and Intentions
Estimates
 Quarterly projectors and related indicators
Quarterly sources of data
 There is no quarterly survey.
 Related indicators are used to measure non-residential construction for
the current year.
Global Approach
Total Construction Activity is obtained by combining data on:
 Material costs (shipments - exports + imports + ∆ inventories)
 + Labour costs (employment, hours and average earnings)
 + Overhead costs and profits
 = Total value of construction activity
 - Estimates of residential construction (New Construction, A&I)
 + Value added in oil and gas drilling
 = Value of spending on non-residential construction
Non Residential Construction
 Resulting estimates are compared with annual estimates from the Capital
Expenditure Survey and the survey by asset type
 Quarterly estimates are benchmarked during the annual revision cycle
 Annual estimates reflect the most recent data from Input-Output tables
Detailed approaches
I. Buildings:
Institutional, industrial and commercial non-residential
construction (ICSD) based on monthly building permit values and
monthly work put in place (WPIP) coefficients

The monthly Building Permits Survey of Canadian
municipalities collects data on the value of construction
intentions for buildings in the non-residential sector and the
number of dwellings authorized and value of construction
projects in the residential sector.

The WPIP coefficients measure, by quarter of start, by province
and by type of building, the volume of work normally executed
in each construction period.
Detailed Approaches
II. Engineering:
 Highways:
 Material costs based on asphalt sales in cubic metres *
Industry Product Price Index (IPPI) for asphalt
 Labour costs (SEPH)
 Railways:
 Material costs (e.g. ties, sand, stone, steel, etc.)
 Labour costs (SEPH)
Detailed Approaches
 Other engineering
 Material costs
 iron and steel pipes, other metal building products, wires and cables,
concrete products, prefabricated metal structures, glass products, etc.
 Labour costs based on estimates of
 Hours
 Average weekly earnings
 Number of employees.
 Information based on Labour Force Survey ( LFS ) and Survey of
Employment, Payrolls and Hours ( SEPH )
Non Residential Construction
 Other information used:
 Construction estimates reported in the Quarterly Survey of
Financial Statistics for Enterprises (large companies in mining,
telecommunications, railways…etc.)
 Capital spending by provincial electric utilities – Public Institutions
Division
 Cubic metres drilled in the oil and gas industry – Industry Accounts
Division – Monthly GDP
 Department of Natural Resources (general exploration expenditures
)
Deflation
Buildings
 Non-Residential Building Construction Price Indexes (commercial,
industrial and institutional) – Prices Division
 The Non-residential Building Construction Price Index (NRBCPI) is a
quarterly series measuring the changes in contractors' selling prices of
non-residential building construction (i.e. commercial, industrial and
institutional)
Deflation
Engineering
 In the absence of output price indexes – Input price indexes are
constructed in IEAD:
 Material costs:
 IPPI for prefabricated metal building and structure, line pipe,
other insulated wires and cables, concrete basic products, sand,
stone, ready-mix concrete, etc.
 Labour costs:
 Average weekly earnings (SEPH)
 Overhead costs:
 Average weekly earnings indexes and consumer price indexes
Machinery and Equipment
Spending on durable and tangible goods that have a
productive life of one year or more (whether owned or leased)
including:

purchase, construction and installation costs

feasibility studies, tooling, progress payments

exploration and development costs

net portion of used assets
Business Machinery and Equipment
2003
2004
2005
2006
Furniture
4046
4557
4882
5348
Agricultural Machinery
2972
2938
3108
2644
20357
21606
23974
25128
8223
9315
9632
10072
10806
11000
11364
12053
6465
6216
6353
6620
11337
12110
13140
13679
Other transportation
5089
5338
6780
6532
Telecommunication
6189
5979
5728
5926
Other
5347
5376
5648
5797
Total
80831
84435
90609
93801
Industrial Machinery
Computers
Software
Automobiles
Trucks
Sources of Data
(Annual)

Benchmark data are from the final demand matrix of the Input-Output
tables (IOT).

Current estimates are based on the Capital Expenditures Survey Actual,
Preliminary and Intentions of Investment and Capital Stock Division and

The sum of the quarterly estimates coming from a Supply Disposition
approach.
Sources of Data
(Quarterly)

Supply / Disposition model:
GFME = GO + M – X + change in inventories, where
GO - gross output estimated using shipments
M - imports from International Trade Division
X - exports from International Trade Division

Done at a very detailed level (39 groups), such as for

Telecommunication equipment



Telephone and related equipment including facsimile
Broadcasting and radio communication equipment
Radar & radio navigation equipment
( Re. Supply/disposition models sent to the NBS on March 2007 )
Sources of Data
(Quarterly)

Industrial machinery
Machine tools
 Conveyors, elevators & hoisting machinery
 Packaging and bottling machinery
 Construction & mining machinery
 Logging, pulp & paper industry machinery
 Power generation & marine prop., non-electric
 Electrical generators & motors

Sources of Data
(Quarterly)

Other transportation equipment
Aircraft
 Commercial trailers & semi-trailers
 Truck & bus bodies & cargo containers
 Locomotive, railway & urban trans. rolling stock
 Ships, boats & parts, excl. pleasure


And other groups
Investment in Cars and Trucks

A more direct approach is used to estimate investment in cars
and trucks:

Total sales by type from Survey of New Motor Vehicle Sales

Government and business shares based on data from Motor Vehicles
Manufacturers Association.
Software Investment



Own account software
Pre-packaged software
Custom-design software

Own-account software ( software developed by in-house employees to meet
specific organization needs ) is based on the labour costs of computer
programmers and system analysts and other costs (non-salary) of in-house
software development.

Investment in pre-packaged and custom-design software is estimated residually
(domestic production, plus imports, plus margins, less exports, less personal
expenditure).
Deflation

Machinery and equipment price indexes (MEPIs) are used for all
commodities except computers and software. The MEPI tracks price
movements on a domestic and imported basis (producer price indexes
published by the U.S. Bureau of Labor Statistics are used for the import
component).

The Machinery and Equipment Price Index (MEPI) provides quarterly
estimates of price changes for machinery and equipment purchases, relative
to annual gross additions to capital by Canadian Industry of purchase.
Deflation

The deflator for computers is a weighted average of import and export
computer price indexes.

Own-account software is deflated using a fixed weighted average of hourly
earnings of programmers and systems analysts and an index of costs of nonlabour inputs.

The Commercial Software Price Index from Prices Division is used to deflate
pre-packaged software.

Custom-design software is deflated using a weighted average of the prepackaged and own-account price indexes.
Total Investment on Plant and Equipment, 2005
Millions of dollars
250000
200000
150000
100000
50000
0
MNE
2005 Intentions
Non Res
2005 Preliminary
Total
2005 Actual