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Quarterly Monitor of the Canadian ICT Sector
Third Quarter 2009
Last Update: December 2009
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Gross Domestic Product
ICT output declined…
Real ICT sector output declined in the third quarter of 2009, down 0.1%. While this quarter marks the fourth consecutive decline for the ICT sector, the scale of the decline was marginal in comparison to the past quarters. In contrast, real output for all Canadian industries was up 0.1%, after decreasing for four consecutive quarters. Since the third quarter of 2008, the Canadian economy has fallen by 4.1%, while the ICT sector’s decline has been less drastic, down 2.2%. Even though both the ICT sector and the overall Canadian economy have been trending downward since the third quarter of 2008, their declines have tapered off this quarter.
ICT manufacturing GDP bounced back this quarter by 0.7% after decreasing for four consecutive quarters. Total Canadian manufacturing GDP also rebounded, increasing by 0.3% this quarter after falling for nine consecutive quarters. Over the analyzed period, Canadian ICT manufacturing output has fared better than total Canadian manufacturing output. Real GDP in Canadian ICT manufacturing trended up from 2002 to 2007 and it is only in late 2008 that it started to decline. However, over the same period, real output in total Canadian manufacturing remained relatively stable between 2002 and 2007 and then quickly declined.
ICT services output declined for a fourth consecutive quarter, down 0.3%. On the other hand, total Canadian services output increased for a second consecutive quarter, up 0.6%. Although ICT services output has been trending downwards over the past four quarters, the decline has been modest. Meanwhile, total Canadian services output has tapered off over the last two quarters and seems to be resuming back to its previous upward trend.
In the third quarter, real GDP declined in two of the four key ICT manufacturing industries. The computer and peripheral equipment, and electronic components industries fell by 11% and 3.8%, respectively, while the communications equipment (5.7%) and instruments (0.2%) industries increased for a second consecutive quarter. The computer and peripheral equipment, and electronic component industries have been falling sharply in the recent periods, declining by 37% and 30%, respectively, since the second quarter of 2008. The instruments industry has also been trending down but at a slower rate, with output declining by 10% since the third quarter of 2007. Meanwhile, the communications equipment industry has been increasing rapidly since the end of 2006, up 60%.
The increase of the wholesaling industry output (2.0%) this quarter reduced the scale of the decline of the ICT services industries GDP. Excluding wholesale,ICT services industries output dropped from the previous quarter by 0.4%, marking the second consecutive decline (excluding wholesale) over the analyzed period.
Output fell in three of the four key ICT services industries this quarter. The software, computer systems design, and data processing services industries fell by 1.6%, 0.8%, and 0.5%, respectively. Alternatively, the telecommunication services industry output rose slightly by 0.04%. Even though the increase was negligible this quarter, the telecommunication services industry is the only ICT service industry that continues to exhibit an increasing trend. Out of the key services industries, the software industry has been declining the fastest in the recent periods, followed by the computer systems design and data processing services industries.
*See ICT service definition at the end of the page. This total includes the ICT wholesaling industries.
Manufacturing Shipments
ICT manufacturing shipments are up this quarter…
ICT manufacturing shipments increased this quarter by 0.9% after falling steeply for two consecutive quarters. Although ICT manufacturing shipments bounced back this period, it has not nearly recovered from the sharp drop from the previous two periods, and still remains at a low level only seen this year. Canadian manufacturing shipments also bounced back this quarter (5.1%) after declining rapidly for three consecutive quarters. Similar to ICT manufacturing shipments, this increase does not nearly offset the previous large declines. Canadian manufacturing shipments continues to remain at a low level not before seen over the period analyzed in the report. Since the third quarter of 2008, ICT manufacturing shipments has declined by 12%, while total manufacturing shipments has declined by 20%.
…due to increases in two key industries.
Growth in shipments in the communications equipment (3.2%) and instruments (3.0%) industries were responsible for the increase in total ICT manufacturing shipments this quarter. Meanwhile, shipments in the computer and peripheral equipment and electronic components industries declined by 17% and 5.6%, respectively. Since the end of 2006, shipments of computer and peripheral equipments and electronic components industries have followed each other closely in trend, both heading downwards. Shipments of the communications equipment industry have been trending upwards since the end of 2006. Meanwhile, shipments of instruments industry have been pretty stable, but have been increasing for the last two quarters.
Employment*
ICT employment declined…
The number of employees in the ICT sector is on its third consecutive quarterly decline for 2009, down 1.1%. While the number of employees in the Canadian economy decreased for a fourth quarter in a row (-0.4%), the scale of the decline lessened in comparison to the previous two quarters. The rate of decline over the last three quarters for employment in the Canadian ICT sector closely matches the total Canadian economy. Since the last quarter of 2008, the number of employees declined by 3.1% in the ICT sector, and 2.9% in the whole Canadian economy.
For this quarter, the number of employees in ICT manufacturing industries declined at a faster pace than the previous quarter, down by 4.9%. Meanwhile, the decline in the number of employees for all Canadian manufacturing industries was less than the previous quarter, down by 2.2%. While employment in ICT manufacturing industries has, for the most part, remained fairly stable between the beginning of 2005 and the second quarter of 2008, it began to follow employment in total Canadian manufacturing industries in the third quarter of 2008, where both began to trend steeply downwards.
Employment in the Canadian services sector and ICT services industries fell this quarter by 0.3% and 0.2%, respectively, marking the third consecutive decline for both. Although employment has been declining in both ICT services and total Canadian services industries for the past three quarters, the declines have been more modest than in the manufacturing industries.
The number of employees in all four key ICT manufacturing industries fell this quarter. However, the decline in the communications equipment industry (-0.4%) was marginal in comparison to the declines in the other three key ICT manufacturing industries. Employment in the electronic components, computer and peripheral equipment, and instruments industries decreased by 11.8%, 9.6%, and 5.2%, respectively. The scale of the decline has increased greatly from the previous quarter for all of the key ICT manufacturing industries with the exception of the communications equipment industry. In the last four quarters, the declines in employment in the computer and peripheral equipment and electronic component industries were predominately responsible for the downward trend in ICT manufacturing industries. Since the third quarter of 2008, the number of employees in these two industries declined 25% and 20%, respectively.
On the services side, only one out of the three key ICT services industries increased this quarter. The number of employees in the telecommunications services industry was up again this quarter by 2.9%, making it the fifth consecutive quarterly increase since second quarter of 2008. On the other hand, the number employed in the software industry fell for a third consecutive quarter, down 5.0%, and those employed in the computer systems design industry declined this quarter by 1.0%. While the decline in employment in the computer systems design industry has been modest over the three periods, the decline in the software industry has been more drastic.
*See note 1 at the end of the page.
Exports of Goods
Exports of ICT decreased…
This quarter marks the third consecutive decrease for ICT goods exports. However, the rate of the decline for ICT goods exports has slowed down. The decrease this quarter was about half of the decrease in the previous quarter, down 5.5% compared to 13% in the second quarter. Meanwhile, total Canadian exports bounced back by 1% after declining rapidly for three quarters in a row.
…due to fall in exports of three key ICT goods
Three out of the four key ICT product group exports experienced drops this quarter. Exports of instruments have been falling rapidly over the past four quarters and were down 13% this quarter, nearly double the decrease of the previous quarter. Communications equipment (-9.3%) and computer equipment (-8.2%) exports also fell for a fourth and third consecutive quarter, respectively. On the other hand, exports of electronic components were up this quarter by 8.8%, after declining for two quarters in a row.
Within this year, exports of computer equipment and communications equipment have reached their lowest level over the analyzed period, as they have been continually falling in 2009. Computer equipment exports have been moderately stable between the beginning of 2004 up until the third quarter of 2008, where they started to fall rapidly afterwards, declining by 30%. On the other hand, electronic component exports have been more variable over the analyzed period, with sharp drops and increases occurring erratically. Exports of communications equipment had been trending up from the end of 2003 to the beginning of 2007 when they started to drop, falling by 46% since. Similarly, exports of instruments were growing until the beginning of 2008 when they started exhibiting the current downward trend.
Exports to the US declined…
ICT exports to the US fell for a third consecutive quarter, down 7.2%, though the drop was less than half of the previous quarter’s drop (-18%). The US share in Canadian ICT exports continued to decline and now stands at 63%, down 1 percentage point from the previous quarter.
ICT exports to the Asia Pacific economies dropped for a second consecutive quarter (-6.6%), about half the decline of the previous quarter (-12%). ICT exports to the Asia Pacific economies have fallen by 36% since the third quarter of 2006. ICT exports to the EU-25 also declined for a third quarter in a row, down 4.4%.ICT exports to the EU-25 have been sloping downwards since the beginning of 2006, closely following the trend of the Asia Pacific economies. Exports to ‘Other Countries’ also fell this quarter (-3.9%) after increasing in the previous quarter. The shares of exports to the EU-25 and ‘Other Countries’ continued to grow, with each amounting to 12.7% this quarter. Meanwhile, shares of exports to the United States and the Asia Pacific fell, with shares amounting to 63% and 11.4% this quarter.
Notes, Definitions and Sources
Real GDP Versus Manufacturing Shipments
It is important to note that GDP and shipments differ in two ways. First, GDP measures the total contribution of an industry to the economy in terms of value-added while shipments are a simple measure of revenues. Most of the time, changes in shipments are good indicators of changes in GDP but structural changes to an industry (for example, an increase in outsourcing) can lead to different trends in GDP and shipments indices. Second, GDP is measured in constant dollars while shipments are measured in current dollars. This means that when prices increase, GDP fluctuates less than shipments but when prices decline, GDP fluctuates more than shipments. In the ICT context, this difference is very important in measuring output of the computer equipment industry since a hedonic price index is used. A hedonic price index is a statistical tool used to standardize per unit prices for goods whose quality and characteristics change rapidly such as a computer. The hedonic price index adjusts the price of a computer based on the improvements in speed, design, etc. Using this hedonic price deflator, a very rapid decline in production prices is observed resulting in a much stronger growth in the GDP index compared to the shipments index for the computer equipment industry.
Information and Communications Technologies Sector*
ICT Manufacturing:
- Computer and Peripheral Equipment Manufacturing
-
Communications Equipment Manufacturing
- wired communications equipment manufacturing
- wireless communications equipment manufacturing
- Audio and Video Equipment Manufacturing
- Electronic Component Manufacturing
- Instruments Manufacturing
- Communication Wire and Cable Manufacturing
- Commercial and Services Machinery Manufacturing
ICT Services:
- Software
- Computer Systems Design
- Data Processing Services
- Telecommunications Services
- Cable and Other Program Distribution
- ICT Wholesaling
*Based on the North American Industry Classification System
(NAICS).
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Sources:
GDP (2002 constant dollars): GDP by
Industry, Industry Measures and Analysis Division, Statistics
Canada.
Manufacturing Shipments: Monthly Survey of Manufacturing,
Manufacturing, Construction and Energy Division, Statistics
Canada.
Employment: Survey on Employment, Payrolls and Hours (SEPH),
Labour Statistics Division, Statistics Canada.
Exports: Trade Data Online, International Trade Division,
Statistics Canada.
Notes:
1. Employment trends based on the Survey on Employment, Payrolls and Hours (SEPH) used in this publication might be slightly different from the trends based on annual industry specific surveys reported in the ICT Statistical Overview. Although data from SEPH might not be as reliable as data from industry specific surveys, they are more timely and provide an indication of the current employment situation.
back2. Data used in this report are adjusted for seasonal variation.
Export Markets:
United States: United States.
EU-25: United Kingdom, Germany, France, Belgium, Netherlands, Italy, Spain, Sweden, Austria, Finland, Ireland, Denmark, Poland, Portugal, Czech Republic, Greece, Luxembourg, Hungary, Slovenia, Latvia, Lithuania, Estonia, Slovakia, Cyprus and Malta.
Asia Pacific (based on Department of Foreign Affairs and International Trade definition): Australia, Bangladesh, Brunei Darussalam, Cambodia, China, Hong-Kong, India, Indonesia (Includes East Timor), Japan, South Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam, Afghanistan, Bhutan, Cook Islands, Fiji, French Polynesia, Guam, Kiribati, Kyrgyz Republic, Laos, Macao, Maldives, Micronesia, Mongolia, Myanmar, Nauru, Nepal, New Caledonia, Niue, Papua New Guinea, Solomon Islands, Tajikistan, Tonga, Turkmenistan, Uzbekistan, and Vanuatu.
Contact: Sylvain de Tonnancour, 613-954-2971
