Definitions

Output gap

The output gap is the difference between the economy's actual output and the level of production it can achieve with existing labour, capital, and technology without putting sustained upward pressure on inflation. Learn more

Difficulty meeting an unanticipated increase in demand/sales (% firms)

From the Business Outlook Survey conducted by the Bank of Canada’s regional offices, proportion of firms reporting (some or significant) difficulty meeting an unexpected increase in demand/sales. Learn more

Unfilled orders/shipments - Manufacturing excluding aerospace products and parts: Proportion of unfilled orders to shipments

Unfilled orders represent a backlog or stock of orders that will generate future shipments assuming that they are not cancelled. Unfilled orders are calculated on a Canada-wide basis, not by province.

Shipments are defined as the value of goods manufactured by establishments that have been shipped to a customer. Shipments exclude any wholesaling activity, and any revenues from the rental of equipment or the sale of electricity. Note that, in practice, some respondents report financial transactions rather than payments for work done. Learn more

Aggregate stock-to-sales ratio

Ratio of stocks to final sales of goods, both expressed in current dollars. Learn more

The foreign activity measure

The Bank’s foreign activity measure (FAM) was designed to help predict demand for Canadian non-commodity exports by capturing foreign demand for the goods and services of Canadian firms. In recent years, this measure has become less reliable, potentially because of an evolution in the composition of foreign demand and structural factors, such as lost export capacity and competitiveness challenges. As a result, the Bank has developed two new analytical approaches to help better predict demand for Canadian exports.

Foreign Activity Measure-Input/Output

The first approach, Foreign Activity Measure-Input/Output (FAM-IO), calibrates the weights of various components based on the 2014 World Input-Output Database (produced by the European Commission). This measure more accurately reflects the sources of demand for Canadian goods and services within the United States and globally.

Global Real Activity for Canadian Exports

The second approach, called Global Real Activity for Canadian Exports (GRACE), incorporates information from a large number of international economic indicators to estimate foreign demand for Canadian exports. It uses final expenditure and production variables from the United States and all of Canada’s major trading partners. This allows the determinants of demand for Canada’s goods and services, and their importance, to evolve through time. It can also provide estimates of foreign demand for many subaggregates of exports, allowing for richer analysis.

Additional details

The two new measures are updated four times a year, concurrently with the publication of the Monetary Policy Report.

For an overview of the Bank’s revised framework of forecasting exports, see the Monetary Policy Report, January 2017, page 15.

A complete description of FAM-IO can be found in Staff Discussion Paper No. 2017-1, “An Improved Equation for Predicting Canadian Non-Commodity Exports.”

A description of GRACE can be found in Staff Discussion Paper No. 2017-02, “Global Real Activity for Canadian Exports: GRACE.”