Thursday, July 3, 2014

April 2014 Canadian GDP Disappoints, What About Ontario and Martin Regg Cohn Says Don't Worry, Wynne Will Balance 2017-2018 Budget

A bit of a long blog post title, but I'm going somewhere with it. Plus there's something I want to record for posterity.

I'm not certainly not the first prognosticator in North America to say that GDP growth in the next few years is going to be disappointing. However I'm one of the rare few that focuses on Ontario's GDP growth, which unfortunately for Ontarians doesn't often get a lot of focus. Not even in the most recent election campaign.

We have already covered here the fact that Canada had 1.2% GDP growth in the first quarter of 2014 and that combined with US GDP growth of -2.9%, that can't be good for Ontario. Canada's GDP growth for the fourth quarter of 2014 was 2.9% while Ontario's was 1.9%. Ontario also suffered the same bad winter as the rest of the US. That's however in the past, although we won't know Ontario's first quarter number until August.

On both sides of the border, some have been predicting a rapid snap back in the second quarter of 2014. Estimates are now out for Canada's April GDP numbers and they are disappointing:

"Statistics Canada said Monday the economy grew by 0.1 per cent in April, the same pace as in March.
Economists had expected a gain of 0.2 per cent, according to Thomson Reuters."

“Even if some of April’s weakness should prove temporary, and thus likely to influence the next month’s readings positively, the disappointment means that growth is likely to come in closer to two per cent than 2.5 per cent (the Bank of Canada’s prior forecast) in the second quarter,” Exarhos wrote in a note to clients."

So no snap back and a reduction of an estimate for Canadian GDP growth to 2%. Considering the recent relationship between Canadian and Ontario GDP growth, the 2014 full year GDP growth for Ontario will probably be less than 2%. Which isn't good coming off two years in a row of 1.2% GDP growth. Plus considering the recent ratcheting up of oil prices due to the murk that is Iraq, June probably isn't going to be a great month for GDP in Ontario and if the relatively high prices continue into the third quarter, Ontario's third quarter GDP probably won't be any great shakes either.

Now on to Toronto Star columnist Martin Regg Cohn and the Ontario Liberals and posterity. Cohn has recently wrote two columns, one where he tells the Ontario PCs that come around the next election that the budget will be not just be balanced, but in surplus:

"By the 2018 campaign, the budget will be mostly likely in surplus (see: Paul Martin)."

Wow. The Liberals have been saying for quite some time that the 2017-2018 will be balanced, and Cohn here is likely referring to the 2018-2019 budget. Still that's astonishing and that assertion needs to be preserved and remembered and referenced when that time finally rolls around. Cohn as a backup for that refers to another column, entitled "Kathleen Wynne won't back down on activist plan", which has the text "And she stands by her promise to wipe out Ontario's deficit within three years."

Well that settles it. Wynne says she will balance the budget in fiscal year 2017-2018 and Cohn assumes that will happen and it apparently has something to do with Paul Martin.

The thing is, Ontario's GDP growth has been woeful for some time and all indications are it will continue to be woeful in the future. Balancing the Ontario budget in 2017-2018 requires some assumptions of decent growth that just aren't going to happen. There may not be new money for public sector unions, but in reality there will be less money.

Surly Hamiltonian will be continuing to follow Ontario's GDP growth and deficits and will also periodically check in on Cohn's assertion that by the 2018 the budget will most likely be in surplus.


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