Transportation and the Economy

SPECIAL REPORT: Study shows that transportation more important to economy than first thought  - 05/19/2006

OTTAWA – The impact of the transportation sector on Canada's economy extends well beyond the many trucking, rail, and aircraft companies that provide "for-hire" services in the marketplace, says a new study by Stats Can.

Canada's System of National Accounts, which is used to evaluate the performance of the Canadian economy, only identifies for-hire firms that sell their services in the market place. However, the study found that when the many industries that use private, "own-account" or "in-house" transportation – such as the wholesaling sector – are included, transportation's contribution to the economy comes ahead of several major industrial groupings, such as retail trade, construction and the huge mining, oil and gas sector.

The for-hire transportation industry itself accounts for about 3.7 percent of economic output as measured by gross domestic product. That number jumps to 6.3 percent when own-account services are included. Transportation's contribution is still about one-third of that of the manufacturing, finance, insurance, and real estate sectors.

The study estimates the total contribution of transportation to the economy in 2000 amounted to nearly $64 billion. Of this total, own-account transportation services represented about 42 percent, or nearly $27 billion.

The composition of the two transportation components, for-hire and in-house, is quite different. Truck and delivery van services dominate own-account transportation, accounting for nearly 89 percent of the entire sector. The remaining 11 percent consists of small proportions for air, rail, water, bus and other ground transportation.

On the other hand, truck and delivery services accounted for only 45 percent of the for-hire component, while air represented nearly 13, rail 11, and water 2.5 percent respectively.

In relative terms, demand for transportation services highest in wholesale trade, the study notes. Nationally, industries spent an estimated 3.4 cents on transportation for every dollar of output in 2000, according to the study.

The demand in relative terms was above this national average in five sectors: wholesale trade; retail trade; commercial, professional, personal and other services; agriculture, forestry and fishing; and automotive rental, leasing repair and maintenance services.

Wholesalers and retailers, in particular, rely heavily on own-account by supplying over 80 percent and 70 percent of their transportation needs respectively. This is virtually all related to truck and delivery van services, according to Stats can.

"For-hire transportation services for retailers are also heavily geared to trucking. On the other hand, the for-hire transport needs of wholesalers are primarily tied to both trucking and transportation support services. The latter are intermediaries between shippers and carriers such as, freight forwarders, shipping agents and customs brokers," the study states.

Other industries that relied more heavily on own-account than for-hire transportation were: agriculture, forestry and fishing; mining, quarrying and oil and gas; construction; and public administration (mainly provincial and municipal governments).

At the end of the line, to deliver a dollar's worth of goods and services to final demand requires 6.4 cents of transportation services. The highest transportation costs were associated with wholesaling services, where they accounted for more than 13 cents.

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