Thursday, March 24, 2016

Federal Budget 2016-2017 Thoughts

There's not a lot I can say that hasn't been said by people who follow the federal budgets closer than I. This Stephen Gordon piece in Maclean's is good.

I would say that this follows the playbook of the Ontario Liberals, which isn't surprising when Trudeau's closest advisers (Katie Telford and Gerald Butts) are former Ontario Liberal advisers. Spend a lot, say it will bring growth and the growth doesn't materialize. Most of the spending doesn't seem like it will cause productivity growth and some of the social spending looks like it will encourage people to work less. People need to remember people respond to incentives.

When pundits say Canadians are OK with near 30 billion dollar budgets, I don't think they are totally wrong, however approximately 60% of Canadians voted for balanced budgets.

Finally the federal Liberals are also borrowing from the provincial playbook where they predict a colossal deficit and then claim they succeeded after they slightly beat that target. Or don't when GDP growth doesn't materialize sufficiently. Or a global slowdown occurs, which doesn't seem unlikely over Trudeau's term.

Friday, March 11, 2016

Canada and Ontario February 2016 Job Numbers

Some mediocre numbers for both Canada and Ontario even with the really low Canadian dollar. Jobs overall in Canada were down 2,300 in February and down 8,000 since December. Full-time jobs sank by 51,800 while part-time rose by 49,500. Since October, jobs are down by 18,100.

Ontario after two months of jobs gains, was down by 11,200. Full-time employment was way down, with 48,900 job losses, while part-time jobs were up by 37,700. Since October full-time jobs were up 10,300 in Ontario.

Wednesday, March 2, 2016

Canada's Fourth Quarter 2015 GDP Growth and Ontario's

Statscan has released its numbers for fourth quarter GDP growth for the country and while the number 0.8% annualized may have been slightly better than expected, it was by no means good. For one thing population growth is more than 0.8% yearly in Canada, so on a per capita basis, GDP decreased slightly.

This Bloomberg article does a good job of looking at the underlying weakness.

"Although growth beat expectations, the details suggest a weak recovery. The most significant contribution to the fourth-quarter expansion was an 8.9 percent drop in imports, the largest such decline since the first quarter of 2009. That was the result of the Canadian dollar depreciating 7.5 percent over the last 12 months, making foreign imports such as electronics more expensive.

The weaker currency failed to generate stronger exports, however. Shipments abroad fell 2.2 percent, the fourth decline in five quarters. If imports fall faster than exports, GDP expands. Business investment also shrank by 6.5 percent, the fourth straight drop.

The details of the report were “unambiguously bad,” David Tulk, chief Canada macro strategist at TD Securities in Toronto, wrote in a research note. The fourth-quarter result, and signs growth will exceed 1 percent from January to March “will cement the Bank on the sidelines at least through to the second half of the year,” he said."

The fact that exports declined even with a low dollar isn't good at all. It is true that a lot of that export weakness could have been petrochemical related, but for Ontario it would seem that exports can't be that great.

In terms of what Ontario's GDP could be, in the third quarter Ontario's GDP was a strong 3.5% annualized versus 2.3% overall for the country. With the country only having 0.8% growth in the third quarter, it seems unlikely that Ontario could generate 3.5% growth in the fourth quarter again.