The Ontario government has published their first quarter GDP number in the quarterly economic accounts and the news isn't good. The economy declined by 0.1% or 0.2% on an annualized basis. That's the first negative quarter of GDP growth since the second quarter of 2011. Exports declined 2.0% which isn't good news (for GDP especially) and somewhat surprising considering the low dollar although the US also declined by 0.2% annualized in the first quarter and since most Ontario exports go to the US that probably explains some of the export decline. Imports were only off 0.2%. Curiously I haven't seen this first quarter decline reported anywhere else, but I may have missed it.
In other bad news in the report, "Capital spending on machinery and equipment declined 1.2%." That's not good for future GDP growth. Also inventories increased by $8.1 billion in the quarter after increasing by $5.8 billion in the fourth quarter. That also isn't good for future GDP growth as eventually they will need to be drawn down.
I already mentioned that the US GDP declined 0.2% in the first quarter, while Canada as whole decline 0.6% on an annualized basis. So for Ontario, performance was obviously better than for Canada as a whole, but still negative. Canada's GDP number for the second quarter should be coming out in the next few days. April's number was slightly negative, so the Canada number for a whole shouldn't be very high and one would expect Ontario's wouldn't be either (although Ontario has had decent jobs growth for May and June). The US Atlanta Fed model prediction for second quarter GDP was a much healthier 2.4% on July 27, so maybe that will help out Ontario's second quarter number.
The current budget document predicted GDP growth for 2015 for Ontario of 2.7%. With this slightly negative number in the first quarter and possibly a weak number in the second, it will be difficult to hit that. Some Canadian banks had predictions of over 3% growth in 2015 Ontario, but that clearly won't happen, as that would require growth of at least 4.5% in the last three quarters. Lower GDP growth will probably also affect government tax revenues, which could lead to a wider than anticipated deficit in 2015-2016 fiscal year.
Showing posts with label ontario first quarter 2015 gdp. Show all posts
Showing posts with label ontario first quarter 2015 gdp. Show all posts
Tuesday, July 28, 2015
Wednesday, June 3, 2015
Canadian First Quarter of 2015 GDP Growth Terrible, What About Ontario's?
I meant to post about Canada's GDP growth in the first quarter last week when the news came out, but I was somewhat slow. In the first quarter, GDP contracted by 0.6% (annualized) almost in line with the contraction in the US of 0.7%.
Now obviously that contraction has a lot to do with crashing oil prices. However saying that poor GDP performance is limited to Alberta would seem to be incorrect. Compared to Ontario's and Quebec's GDP, Alberta's contribution to overall GDP growth is significantly smaller. It is doubtful that Alberta's performance could be that bad and Ontario and Quebec's performance that much better with a 0.6% contraction. Probably at best Ontario posted zero growth, however considering how correlated Ontario's GDP is with US GDP, Ontario also having a negative growth first quarter is certainly possible.
Unfortunately the Ontario government won't announce the provincial GDP number for some time. However it should be remembered in the current budget document that the finance ministry is predicting 2.7% GDP growth for Ontario in 2015. If Ontario had a zero number in the first quarter, I doubt that growth will be strong enough in the remaining three quarters to get to 2.7% (even more amusingly, there's a Canadian bank predicting 3.3% GDP growth for Ontario in 2015 which was made in March!).
US growth is looking better in the second quarter of 2015, but not great (the Atlanta Fed GDPNow forecast for the second quarter is 1.1% at the time of writing). So it seems doubtful that Ontario will have a particularly strong second quarter either. If growth for 2015 is significantly below 2.7%, then tax revenues for Ontario are going to take a hit.
With Ontario's population growth around 0.9%, GDP growth per capita will likely not be much above 1% a year, about where it has been since the last recession. I don't see why that would change.
Now obviously that contraction has a lot to do with crashing oil prices. However saying that poor GDP performance is limited to Alberta would seem to be incorrect. Compared to Ontario's and Quebec's GDP, Alberta's contribution to overall GDP growth is significantly smaller. It is doubtful that Alberta's performance could be that bad and Ontario and Quebec's performance that much better with a 0.6% contraction. Probably at best Ontario posted zero growth, however considering how correlated Ontario's GDP is with US GDP, Ontario also having a negative growth first quarter is certainly possible.
Unfortunately the Ontario government won't announce the provincial GDP number for some time. However it should be remembered in the current budget document that the finance ministry is predicting 2.7% GDP growth for Ontario in 2015. If Ontario had a zero number in the first quarter, I doubt that growth will be strong enough in the remaining three quarters to get to 2.7% (even more amusingly, there's a Canadian bank predicting 3.3% GDP growth for Ontario in 2015 which was made in March!).
US growth is looking better in the second quarter of 2015, but not great (the Atlanta Fed GDPNow forecast for the second quarter is 1.1% at the time of writing). So it seems doubtful that Ontario will have a particularly strong second quarter either. If growth for 2015 is significantly below 2.7%, then tax revenues for Ontario are going to take a hit.
With Ontario's population growth around 0.9%, GDP growth per capita will likely not be much above 1% a year, about where it has been since the last recession. I don't see why that would change.
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