Monday, February 2, 2015

2014 Ontario GDP Growth, Second and Third Quarters

I've been meaning to blog about Ontario's second and third quarter GDP growth. The third quarter 2014 numbers were released in January at the Ontario's Finance ministry's site here

Third quarter GDP was actually quite good:

"Ontario’s real Gross Domestic Product (GDP) increased 1.0% (4.0% annualized) in the third quarter of 2014, following a 0.8% (3.2% annualized) advance in the second quarter. The strong third-quarter gain was led by higher household and business spending, along with robust export growth."

Note that the first quarter number was considerably less:

"Real GDP grew by 0.1 per cent (0.6 per cent annualized) in the first quarter of 2014.

So with the three together, that's approximately 2.6% which is impressive by recent Ontario standards of GDP growth. So with any decent growth in the fourth quarter the 2014 GDP number should be over 2%. That's not particularly impressive, but compared to the string of 2% GDP growth numbers the province has been posting the past couple of years, that's something.

However the fourth quarter numbers don't look like they are shaping up that great as made clear in this Financial Post article titled "Canada’s slumping GDP reveals troubles in just about every sector"

From the article it isn't just oil:

"Friday’s GDP report made crystal clear how grimly Canada’s economy — one that contracted 0.2% in November – had been quietly tanking, which contributed to the Bank of Canada’s surprise move last week when it cut its prime setting rate.

While the bleak oil picture was fully developing, the thinking was that Canadians shouldn’t worry about the economy, manufacturing would carry the standard. However, manufacturing output, which accounts for 10.5% of GDP, fell even further than the energy sector, declining 1.9%, even though the Canadian dollar had already begun sliding, according to Statistics Canada."

So if manufacturing is tanking even more than oil, that can't be good for Ontario's fourth quarter of 2014 GDP number. Other industries crucial to Ontario also aren't doing well:

"Concurrently, wholesale trade slumped 0.6% in November, a second consecutive decline following a decrease of 0.2% in October, coupled with a surprising drop in output of 0.4% in the finance and insurance sector, which had previously risen for five consecutive months."

Certainly the Canadian dollar tanking versus the US dollar can help manufacturing, but it takes time to adjust. The fourth quarter GDP number should be interesting to Ontario and considering that a small number of jobs were actually lost in November and December in Ontario, there's not a lot of good signs. Could the fourth quarter numbers even be negative?

The first quarter number for 2015 isn't looking great either. We'll know more when the January employment numbers come out.


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