Real production and real income growth over the COVID-19 pandemic

Sean Clarke and Ryan Macdonald

Economic and Social Reports from Statistics Canada, Analytical Studies and Modelling Branch

Abstract: During the COVID-19 pandemic, real consumption and real gross fixed capital formation (GFCF) grew at a stronger pace than real gross domestic product (GDP). Typically, real consumption and real GFCF are expected to progress similarly to real GDP, making the pandemic period unusual. This article illustrates how examining real income rather than real production can address this paradox. Specifically, the roles of changes in production (the use of capital, labour and multifactor productivity to produce real GDP) and changes in non-production sources of real income growth (the trading gain and net income from abroad) are examined. The results show that the terms of trade were a major source of real income growth that supported consumption and GFCF beyond what changes in production would suggest.

Keywords: Real income; terms of trade (search for similar items in EconPapers)
JEL-codes: J23 M21 (search for similar items in EconPapers)
Date: 2023-05-08
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Persistent link: https://EconPapers.repec.org/RePEc:stc:stcp8e:202300400004e

DOI: 10.25318/36280001202300400004-eng

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