Surly Hamiltonian: October 2015

Saturday, October 31, 2015

Ontario Posts 2015 Second Quarter GDP Growth of 1.4%, Revises Up First Quarter GDP to 0%, First Half GDP Per Capita Negative

Ontario posted their second quarter GDP numbers over at the Finance Ministry site. It was 0.4% or 1.4% annualized. Interestingly the first quarter GDP number has been raised to 0.0%, when originally it was -0.2% on an annualized basis, so that's a small positive. With the positive growth in the second quarter Ontario didn't meet the technical definition of a recession of two successive negative quarters.

With growth of 0% and 1.4% in the first two quarters of 2015, that works out to to approximately 0.7% GDP growth in the first half of 2015. That's obviously not that impressive and goes against the narrative that while Alberta is doing poorly, Ontario is doing well. Considering that population growth is around 0.9% annually that means that Ontario actually had a slightly negative GDP per capita in the first half of 2015. That will have implications for Ontario government tax revenues and the deficit.

The finance ministry blamed poor first quarter growth on "unusually harsh weather, supply chain disruptions from the U.S. west coast port labour dispute and retooling at some of Ontario’s auto assembly plants." At the risk of sounding like the Ontarian Zerohedge, winter is cold and snowy in the first quarter and isn't really a surprise. Blaming US west coast stevedores also seems like a bit of a reach.

Some interesting quotes from the finance ministry on the second quarter:

"Capital spending on machinery and equipment decreased 4.9%, the third consecutive quarterly decline, while investment in non-residential construction advanced 4.1%, following a 1.5% increase in the first quarter."

"Businesses increased inventories by $5.8 billion, slowing from an accumulation of $8.4 billion in the first quarter."

"Both exports (+0.7%) and imports (+0.4%) advanced in the second quarter, rebounding from first quarter declines."

The decline in spending on machinery and equipment is depressing given its importance for productivity growth for Ontario and GDP growth per capita. The inventories increasing is also interesting as eventually they will have to normalize. The exports increasing is good although considering the low dollar I'm not sure it is that impressive.

Compared to Canada's overall performance, GDP decreased 0.8% in the first quarter and 0.5% in the second quarter on an annualized basis. So Ontario's growth was 0.8% more than Canada's in the first quarter and 0.9% in the second quarter. In the second quarter, GDP growth in the US was a strong 3.9%, and contracted 0.2% on an annualized basis in the first quarter.

Given that the current Ontario budget document is predicting 2.7% GDP growth in 2015, that seems highly unlikely with around 0.7% growth in the first half. That would require growth of 4.7% in the second half of 2015 which I think most would agree isn't going to happen.

What's next for the third quarter? The initial estimate of the US third quarter growth is 1.5% annualized which is Ontario's largest export market. There are predictions of third quarter growth for Canada of 2.5%, so Ontario as such a large part of the Canadian economy shouldn't be too far off of that. Although oddly the third quarter jobs numbers for Ontario was quite poor, while the second quarter was actually quite good.

Wednesday, October 21, 2015

Bank of Canada Lowers GDP Growth Projections for Canada for 2016 and 2017

So the Bank of Canada announced today that interest rates would stay the same, which wasn't that much of a surprise. Perhaps more surprisingly, the BoC cut their GDP growth projections for 2016 and 2017. The GDP growth was cut to 2.0% from 2.3% in 2016 and 2.5% from 2.6% in 2017. The 2015 number remained at 1.1%.

I'm not particularly surprised, considering that I don't think that the Ontario economy in its present condition with low productivity growth can grow much past 2% a year. The current Ontario budget predicts growth of 2.7% in 2015, which will be impossible to meet now, with negative growth in the first quarter for Ontario and 1.1% GDP now predicted for the entire country. Job growth in Ontario in 2015 has also been almost non-existent. The budget also predicts GDP growth of 2.6% in 2016, which considering the large part of the economy Ontario makes up of the whole country and growth for the whole country is predicted at 2.0%, seems unlikely. That will have knock on effects on the Ontario budget revenues.

Ontario should be releasing second quarter numbers for GDP soon, which should be interesting.

Monday, October 19, 2015

Ontario Peak Electricity Prices Rise 8.7% November 1st 2015, 25% Year on Year, 29.6% in 18 Months

This Global News article reports on the price rises in electricity that occur at the start of November:

"Under the new rules, off-peak hours will increase 0.3 cents to 8.3 cents per kWh, mid-peak hours will increase 0.6 cents to 12.8 cents per kWh and on-peak hours will increase 1.4 cents to 17.5 cents per kWh."

Curiously they can't be bothered to say what the percentage increases are. Peak time prices are actually rising 8.7%, which is quite massive considering that Ontario's inflation is between 1% and 2% and that the price increase follows the one in May, thus it is a 8.7% increase in only six months. Mid-peak prices increased by 4.9% and off-peak prices increased by 3.75%.

Perhaps more curiously the article couldn't be bother to figure out what the year on year increases were. I enumerated the recent price increases in electricity in Ontario in this post. The year on year increase in peak pricing in Ontario for November 1st will be 3.5 cents from 14 to 17.5 cents. That's a 25% year on year increase which obviously is way above inflation. For mid-peak, the increase is 1.4 cents, from 11.4 cents to 12.8 cents, a 12.2% increase. For off-peak pricing, the increase is 0.6 cents from 7.7 to 8.3 cents, a 7.8% increase year over year.

So it would seem the Liberal government of Kathleen Wynne is trying to increase prices of peak electricity relative to off-peak, trying to shift consumption to off peak periods (between 7 pm and 7 am during the November to April time period).

However that's not all. What about the increase over 18 months? On peak pricing increased from 13.5 cents to 17.5 cents, a 4 cent increase or a 29.6% increase over 18 months. Mid-peak prices increased 1.2 cents from 11.2 cents to 12.8 cents or a 14.3% over 18 months. Off-peak pricing increased from 7.5 cents to 8.3 cents, a 0.8 cents increase over 18 months, or 9.4% in percentage terms.

Why the media can't be bothered to go back and look at the increases beyond just the most immediate is somewhat surprising to me. I'm not sure if the reporters are lazy or they are complicit with government and just don't want people to be aware. Probably lazy. One of these days I'll go back and look farther back at electricity price increases in Ontario over the past five years as I'm sure the chart would be interesting.

Sunday, October 18, 2015

Canada Versus Australia Versus New Zealand Versus Ontario Productivity Growth

With low GDP growth in Ontario since basically the Harris years and population growth close to 1% annually, that pretty much means productivity growth has been low for a long time. That's not surprising, considering the collapse of manufacturing in Ontario (mainly automotive) and a switch to a low productivity growth services based economy.

With regards to that, there's a blog post the blog Utopia - You Are Standing In It comparing productivity in Australia, Canada and New Zealand. The blog post is entitled "Is Canada diverging from Australia in labour productivity to become like New Zealand?" It shows an excellent chart of GDP per capita (actually those from 15 to 64) from 1956 to 2013 for Australia, Canada and New Zealand. After starting at a similar level (which surprised me for New Zealand which I thought would have been lower in 1956), Australia and Canada diverge from New Zealand. However from 2000, Australia diverges higher from Canada. The year 2008 seems to be a particularly bad year for Canada versus Australia, likely due to manufacturing collapse in Ontario.

I would like to see the numbers for 2014 and the first half of 2015 for Canada versus Australia as the recent slowdown of China and coal mining would appear to cause some problems for Australia.

However what I would like to see most is Ontario added to the chart because I think it would illuminate the post 2000 period where Canada diverged from Australia, as Ontario was the drag on the Canadian economy.

Saturday, October 17, 2015

Alberta Actually Has Created More Jobs Per Capita in 2015 Than Ontario

I recently made a post about the September 2015 jobs numbers, mainly emphasizing that for Ontario they weren't good, either for the month or year to date. I compared the numbers for Ontario and Alberta.

However looking again at the year to date numbers, 23,000 jobs created in Ontario versus 15,000 in Alberta it occurred to me that while the Ontario ones were higher, on a per capita basis, they probably weren't. And sure enough dividing by the Statscan population numbers for Ontario and Alberta (13,792,052 and 4,196,457 for the third quarter respectively), Ontario created 0.00166763 jobs per capita in 2015 so far versus 0.0035744 in Alberta.

So the narrative that Alberta is totally in the tank economically while Ontario isn't doesn't seem to be particularly true at least in job creation terms.

Sunday, October 11, 2015

Ontario's September 2015 Employment Numbers. Not Good.

So the jobs numbers for September came out from Statscan. For all of Canada, employment went up a mediocre 12,100 jobs. Unfortunately for Ontario, employment went down by a relatively massive 33,800 jobs (oddly Alberta gained 12,300 jobs in September). That follows a smaller loss of 3,900 jobs in August. July's employment numbers were unchanged. So by any measure, that's a pretty stagnant three month period for jobs in Ontario.

One wonders how that will end up showing up in the third quarter GDP numbers. By comparison, for the January, February and March period, jobs went up by 17,100 even though the GDP number was negative for the first quarter. That suggests to me that the third quarter GDP number for Ontario could also be negative (note that the Atlanta Fed's GDPNow model is predicting only 1% GDP growth in the third quarter for the US, Ontario's primary export market).

Obviously the monthly and three months numbers, aren't good for Ontario, what about the entire year's? Since the start of the year, Ontario's jobs numbers are up 23,000, which isn't terrible, but certainly not particularly good either. However, Canada's number is 126,600 since the start of the year, so Ontario's portion is way below its share of Canada's population.

There was also some bad news in terms of the composition of the jobs in Ontario in September. Full-time jobs were down by 67,700 compared to an increase of 34,000 part-time jobs. I'm not sure if there's a statistical aberration with the full-time versus part-time numbers or what. Over the full year, the full-time number is much better, a gain of 67,800 jobs versus a loss of 44,800 part-time jobs.

When Will the Electricity Price Increases For November 2015 Be Announced For Ontario?

Electricity prices are change May 1st and November 1st in Ontario. In theory they could go down, but obviously lately they have gone up quite rapidly. It is now October 11, so we are getting close to the point that the increases should be announced.

For the last increase, I found a CBC article dated April 20th, so likely around October 20th. Conveniently for the federal Liberals, that's after the October 19th federal poll. sdfds

This blog post of mine describes the Ontario electricity price increases in May 2015:

"For on peak pricing, the price per kWh is increasing on May 1st from 14 cents to 16.1 cents, a 2.1 cent increase or 15%. The on peak increase on November 1st was from 13.5 cents to 14 cents, a 3.7 increase. Thus the year over year increase, from 13.5 cents to 16.1 cents, is 2.6 cents or a 19.2% increase which is obviously significantly more than Ontario's inflation rate.

For mid-peak, prices will increase on May 1st from 11.4 cents to 12.2 cents, a 0.8 cents increase or 7%. On November 1st, the price increase from 11.2 cents to 11.4 cents, only a 1.8 percent increase. Year on year the increase was 1 cent or an 8.9% increase, again significantly above Ontario's inflation rate.

Finally for off-peak, the increase on May 1st is 0.3 cents, from 7.7 cents to 8 cents, a 3.9% increase. On November 1st, the price increased from 7.5 cents to 7.7 cents, a 0.2 cent increase or a 2.7% increase. Year over year the increase was 0.5 cents from 7.5 to 8 cents, a 6.7% increase, which is well above Ontario's inflation but nowhere near the massive increase in on peak pricing."

What can we expect for this November? Perhaps 3.5 to 4% overall, with different increases for the different periods. With wind production up and peaking overnight, keeping off-peak rates low relative to peak pricing makes a lot of sense.

Sunday, October 4, 2015

Ontario Hospitals 2014 Sunshine Data and Analysis