Wednesday, November 25, 2015

Atlanta Fed GDPNow Forecast for Fourth Quarter US GDP Lowered to 1.8%, Not Good For Ontario

The Atlanta Fed's GDPNow model for US GDP growth has just cut the fourth quarter estimate to 1.8%, the lowest since they started with predictions after the third quarter ended. It had got up to a high of 2.9% in early November.

What does that mean for Ontario's fourth quarter GDP? One can assume it is not good, considering the US is Ontario's dominant export market. Ontario's first quarter GDP was 0.0% and the second quarter was 1.4% (annualized) so a bad fourth quarter number would likely result in a poor yearly number, even if the third quarter is good (which in itself is a little doubtful considering the August and September manufacturing numbers were low).

Ontario Finance minister Charles Sousa is expecting to give an update on Ontario's finance tomorrow. Should be interesting.

Thursday, November 19, 2015

Is Ontario Going To Have GDP Growth Over 2.0% In 2015? Surly Says No

Surly Hamilton follows the Ontario GDP reports from the finance ministry quite carefully. We were quite skeptical when the current budget document predicted GDP growth of 2.7% for Ontario in 2015. For the first two quarters of 2015, Ontario posted 0% growth in the first quarter and 1.4% in the second quarter (annualized).

So that's roughly 0.7% for the first half, which would require growth in the second half of 4.7% in order to reach the 2.7% prediction. In November, that seems very unlikely.

Now Ontario's financial accountability officer (sort of like the federal PBO) is predicting that the Ontario Liberal promise of balancing the provincial budget in 2017-2018 is unlikely. Part of this reason is that the officer is predicting growth of 2.0% for 2015. Which strikes me as also optimistic as it would require growth of 3.3% in the second half to reach. Given the weakness in Ontario employment growth lately and in the US economy, Ontario's principal export market, good GDP growth in Ontario seems extremely unlikely. The 2015 budget document also predicts GDP growth of 2.2% in 2016, which while more plausible, also seems unlikely to be reached.

Ontario has population growth of around 0.9% per year, so any economic growth beyond this requires productivity growth that Ontario has been unable to generate as it shifts to a service based economy from a manufacturing based economy. 

Sunday, November 8, 2015

Will Kathleen Wynne Lead The Liberals In The Next Election?

With Kathleen Wynne's popularity currently in the toilet (21% approval rating) one has to wonder if she will contest the next election. The Ontario Liberals still maintain they will balance the budget in the fiscal year 2017-2018. That will require cuts and wage freezes which isn't going to help Wynne's popularity to improve too much going forward.

If Wynne were to decide to not face the electoral music similar to Dalton McGuinty, she would likely have to announce it a year before the next election, scheduled for 2018, to allow a leadership contest and a bit of time for the new premier to try and turn the Liberal fortunes around.

Expect more media speculation in a year's time, especially if Ontario's economy stays weak.

Saturday, November 7, 2015

October 2015 Canada Employment Up 41.5K, Ontario 29.2K

Statscan released their employment data for October and the numbers were good for both Canada and Ontario. Jobs rose by 41,500 in Canada, with full-time up 9,000 and part-time up 35,400. However the caveat is that these included jobs associated with the election in October and thus the number is pushed up artificially. We'll have to wait for the November numbers for more of a true number.

Ontario also had a very good number, with jobs up by 29,200. Full-time jobs were up by 26,800 with part-time jobs up by 1,300. Again we will have to wait, as Ontario likely had around 40% of the election hiring. For Ontario jobs are still slightly down since June, which is a fairly stagnant period of employment growth, especially with the increasing population.