Improving Deflators for Estimating Canadian Economic Growth, 1870–1900

We construct a new consumer price index for Canada covering the period from 1870 to 1900. Unlike previous indexes, it includes prices of clothing and household furnishings. This is important because these previously neglected components accounted for roughly 20% of consumers' expenditures. Moreover, the price of cotton goods, the most important textile product used for clothing and household furnishings, fell by half between 1870 and 1900 (much faster than other components of the price level). This has ramifications for both the level and trend of Canadian GDP. Because the largest changes in estimation concern the 1870s, we show that the country grew substantially faster than generally believed. It outpaced the United States so much that it entered the twentieth century with an improved economic standing relative to its southern neighbor.