The Atlanta Fed's GDPNow model for predicting US GDP just made their first prediction for US third quarter GDP on August 6th. Interestingly they predicted only growth of 1.0% versus consensus of 3.0%. Their reason inventories:
"The model projects that lower inventory investment will subtract 1.7
percentage points from third quarter real GDP growth. Real GDP grew 2.3
percent in the second quarter according to the advance estimate from the
U.S. Bureau of Economic Analysis."
Inventories and GDP is a funny thing, so who knows what will happen. But in the first quarter when everyone was predicting decent growth for the US, the Atlanta Fed model was predicting very weak performance, which turned out to be true.
What's that mean for Canada? Many commentators are predicting much higher growth in the third and fourth quarters for Canada after possibly two negative quarters for the first half. That's likely predicated on stronger US GDP as well. If the US does in fact only grow by 1.0% that's not going to be good for Canadian GDP, weak dollar or not. For Ontario especially, which depends on the US for exports, that's not good either. Ontario had GDP growth of -0.2% annualized in the first quarter of 2015 and the second quarter isn't looking so great either. If US growth is weak in the third quarter, Ontario's full year GDP will likely be terrible and way off the Ontario budget's prediction of 2.7% for 2015.
July's job numbers for Canada wasn't remarkable either at 6K and change, which doesn't bode well for strong growth in the third quarter either.
Showing posts with label canada gdp growth. Show all posts
Showing posts with label canada gdp growth. Show all posts
Sunday, August 9, 2015
Tuesday, May 5, 2015
Canada's Trade Deficit Up In March, Implications for Canada and Ontario GDP
Statscan has import and export numbers out for March today. Exports only increased 0.4% compared to imports rising by 2.2% leading to a $3 billion trade deficit. February's trade deficit was revised from $984 million to $2.2 billion. That's obviously not good for Canada's GDP numbers for the first quarter, especially since January and February were already weak. Canada's GDP being inline with the US's GDP growth of 0.2% seems plausible. However with Canada so dependent on energy it is conceivable that Canada's GDP for the first quarter could be even worse than the US.
The numbers for Ontario seem mixed. Statscan reports that exports for March to non-US countries were up 4.2%, however they were down 0.9% for the US which is where most of Ontario's exports go. Which seems a little odd considering the Canadian dollar is down so much against the US dollar although that's probably due to lower energy prices. However the numbers for vehicle and car part exports were excellent, up 11.7% which is definitely good for Ontario and GDP for March (although February was an off month for vehicle production in Ontario).
So for the overall Canadian GDP, the export numbers versus the import numbers are a big drag for March and not good for the overall first quarter. For Ontario the increase in vehicle related exports is good and probably means the first quarter GDP number isn't a complete disaster, but certainly won't be good and will likely make the Ontario finance ministry's prediction of 2.7% GDP growth in Ontario for 2015 hard to reach.
The numbers for Ontario seem mixed. Statscan reports that exports for March to non-US countries were up 4.2%, however they were down 0.9% for the US which is where most of Ontario's exports go. Which seems a little odd considering the Canadian dollar is down so much against the US dollar although that's probably due to lower energy prices. However the numbers for vehicle and car part exports were excellent, up 11.7% which is definitely good for Ontario and GDP for March (although February was an off month for vehicle production in Ontario).
So for the overall Canadian GDP, the export numbers versus the import numbers are a big drag for March and not good for the overall first quarter. For Ontario the increase in vehicle related exports is good and probably means the first quarter GDP number isn't a complete disaster, but certainly won't be good and will likely make the Ontario finance ministry's prediction of 2.7% GDP growth in Ontario for 2015 hard to reach.
Tuesday, April 28, 2015
Ontario 2015 Fourth Quarter GDP Out, 2.5%, Full Year 2014 2.2%
With the 2015-2016 Ontario budget being released, the Ontario finance ministry got around to releasing the fourth quarter of 2014 GDP data on their quarterly accounts site.
The fourth quarter GDP growth number was 0.6% or 2.5% annualized. 2.5% is a relatively strong number given Ontario's GDP numbers since the Mike Harris hay days, although it was down sharply from the second and third quarter numbers which were 3.2% and 4.0% respectively annualized. Note that Canada's fourth quarter GDP number was 2.4% annualized, which is almost the same as Ontario's. The US GDP number was slightly less at 2.2%.
However first quarter growth was only 0.6% annualized, which dragged down the full 2014 Ontario GDP number reported in the quarterly accounts which was only 2.2%. The accounts page helpfully points out this is the strongest annual growth since 2010 (in 2013 GDP growth was only 1.3%) . I'll point out that the most recent provincial population growth rate was 0.9% annually, so for 2.2% a big portion of that was from population growth rather than productivity growth.
Some noteworthy tidbits from the quarterly accounts report and my comments:
"Capital spending on machinery and equipment rose 0.7% in 2014, after declining in the previous two years" - well that's obviously better than negative, but isn't great news for Ontario's productivity.
"Investment in intellectual property products was down 2.1% in 2014, following a 3.4% decrease in 2013." - this isn't particularly good for productivity either.
"Household disposable income rose 3.2%, after increasing 2.7% in 2013. Ontario’s household savings rate declined to 3.2% from 4.6% in 2013." - that's pretty good growth for disposable income, but the fact that Ontario's savings rate went down from last year to truly sad levels I think is a testament to the low growth housing bubble Ontario finds itself in.
"Businesses added $5.4 billion ($2007) to non-farm inventories in the fourth quarter of 2014, after accumulating $1.7 billion worth of stocks in the third quarter." - that doesn't bode well for first quarter GDP growth if there's a lot of inventories to draw down on.
"Exports rose 0.4% in the fourth quarter, following a strong 3.0% advance in the third quarter. Imports expanded 1.5%, after increasing 1.0% in the third quarter." - one would think with the low dollar that exports will be more impressive. If car manufacturing in Ontario is lower in the first quarter of 2015 due to retooling and shutdowns, that isn't going to be good for exports and GDP.
The Ontario first quarter GDP number should be interesting. The US number looks to be weak, similar to the first quarter of 2014 (when Ontario's was also weak). I think there's a pretty good assumption that the first quarter of Ontario will have weak numbers, but now the main question is if the second quarter is going to be weak too.
The fourth quarter GDP growth number was 0.6% or 2.5% annualized. 2.5% is a relatively strong number given Ontario's GDP numbers since the Mike Harris hay days, although it was down sharply from the second and third quarter numbers which were 3.2% and 4.0% respectively annualized. Note that Canada's fourth quarter GDP number was 2.4% annualized, which is almost the same as Ontario's. The US GDP number was slightly less at 2.2%.
However first quarter growth was only 0.6% annualized, which dragged down the full 2014 Ontario GDP number reported in the quarterly accounts which was only 2.2%. The accounts page helpfully points out this is the strongest annual growth since 2010 (in 2013 GDP growth was only 1.3%) . I'll point out that the most recent provincial population growth rate was 0.9% annually, so for 2.2% a big portion of that was from population growth rather than productivity growth.
Some noteworthy tidbits from the quarterly accounts report and my comments:
"Capital spending on machinery and equipment rose 0.7% in 2014, after declining in the previous two years" - well that's obviously better than negative, but isn't great news for Ontario's productivity.
"Investment in intellectual property products was down 2.1% in 2014, following a 3.4% decrease in 2013." - this isn't particularly good for productivity either.
"Household disposable income rose 3.2%, after increasing 2.7% in 2013. Ontario’s household savings rate declined to 3.2% from 4.6% in 2013." - that's pretty good growth for disposable income, but the fact that Ontario's savings rate went down from last year to truly sad levels I think is a testament to the low growth housing bubble Ontario finds itself in.
"Businesses added $5.4 billion ($2007) to non-farm inventories in the fourth quarter of 2014, after accumulating $1.7 billion worth of stocks in the third quarter." - that doesn't bode well for first quarter GDP growth if there's a lot of inventories to draw down on.
"Exports rose 0.4% in the fourth quarter, following a strong 3.0% advance in the third quarter. Imports expanded 1.5%, after increasing 1.0% in the third quarter." - one would think with the low dollar that exports will be more impressive. If car manufacturing in Ontario is lower in the first quarter of 2015 due to retooling and shutdowns, that isn't going to be good for exports and GDP.
The Ontario first quarter GDP number should be interesting. The US number looks to be weak, similar to the first quarter of 2014 (when Ontario's was also weak). I think there's a pretty good assumption that the first quarter of Ontario will have weak numbers, but now the main question is if the second quarter is going to be weak too.
Friday, April 3, 2015
US Jobs Numbers Poor for March 2015; Effects on Ontario
The US jobs numbers for March came out on Friday (Canada's numbers won't come out until next Friday and not due to the holiday; those should be interesting). At only 126,000 it was a really weak number and the weakest number for about a year. Certainly bad weather in the Northeast could be blamed for a bad February number, but I don't think there are too many weather effects for March.
Adding to March's weak numbers, the January and February numbers were reduced by 69,000 jobs meaning the overall first quarter for the US isn't looking good. The Atlanta fed has a prediction that the growth for US GDP will be zero in the first quarter.
So what's this mean for Ontario? Surly Hamiltonian has been annoyed by the Canadian media meme that with the low dollar and low oil prices, suddenly Ontario is going to kick ass after sucking economically (by GDP measures) since basically the Harris years. Even Kathleen Wynne has been pumping that story. The problem is that there's not a lot of evidence of this new economic strength lately. To be fair, the second and third quarters of 2014 were strong for Ontario (4.0% and 3.2% annualized respectively), however that was after a really weak first quarter GDP number (0.6%) in 2014. The fourth quarter number hasn't been announced yet, but I don't think it will be as strong as the second and third quarter numbers.
What about this first quarter that just finished? A lot of media had been claiming that with strong US growth that should spill over into Ontario. However with first quarter growth in the US weak that obviously is going to have an effect on Ontario and one can't argue that there is 4.0% growth in the US anymore. Plus there is the real possibility that the US could be weak all the rest of 2015 with the knock on effects in Ontario.
Of course one could argue that even with weak US growth, with the dollar down so much versus the American dollar, that Ontario should do well. However all the manufacturing numbers I've seen haven't been particularly good lately. Ontario doesn't make as many cars as we used to and there's not a lot of evidence that that is suddenly going to change because of the dollar (the Mexican peso hasn't been doing so hot lately either, plus autoworker salaries are a lot less in Puebla than in Oshawa). With the low dollar, less Ontarians will go shopping across the border or go on foreign holidays so there should be some boost to GDP there as more money is kept in the province.
Surly Hamiltonian has argued that Ontario is basically a low wage service sector economy now with a very strong housing component, with little productivity growth and what GDP growth there is is basically from population growth of around 1.1% per year mainly fueled by immigration. So one shouldn't really expect much in the way of GDP growth in this era. No matter how badly Alberta is doing.
Adding to March's weak numbers, the January and February numbers were reduced by 69,000 jobs meaning the overall first quarter for the US isn't looking good. The Atlanta fed has a prediction that the growth for US GDP will be zero in the first quarter.
So what's this mean for Ontario? Surly Hamiltonian has been annoyed by the Canadian media meme that with the low dollar and low oil prices, suddenly Ontario is going to kick ass after sucking economically (by GDP measures) since basically the Harris years. Even Kathleen Wynne has been pumping that story. The problem is that there's not a lot of evidence of this new economic strength lately. To be fair, the second and third quarters of 2014 were strong for Ontario (4.0% and 3.2% annualized respectively), however that was after a really weak first quarter GDP number (0.6%) in 2014. The fourth quarter number hasn't been announced yet, but I don't think it will be as strong as the second and third quarter numbers.
What about this first quarter that just finished? A lot of media had been claiming that with strong US growth that should spill over into Ontario. However with first quarter growth in the US weak that obviously is going to have an effect on Ontario and one can't argue that there is 4.0% growth in the US anymore. Plus there is the real possibility that the US could be weak all the rest of 2015 with the knock on effects in Ontario.
Of course one could argue that even with weak US growth, with the dollar down so much versus the American dollar, that Ontario should do well. However all the manufacturing numbers I've seen haven't been particularly good lately. Ontario doesn't make as many cars as we used to and there's not a lot of evidence that that is suddenly going to change because of the dollar (the Mexican peso hasn't been doing so hot lately either, plus autoworker salaries are a lot less in Puebla than in Oshawa). With the low dollar, less Ontarians will go shopping across the border or go on foreign holidays so there should be some boost to GDP there as more money is kept in the province.
Surly Hamiltonian has argued that Ontario is basically a low wage service sector economy now with a very strong housing component, with little productivity growth and what GDP growth there is is basically from population growth of around 1.1% per year mainly fueled by immigration. So one shouldn't really expect much in the way of GDP growth in this era. No matter how badly Alberta is doing.
Friday, November 30, 2012
Third Quarter Canadian GDP Growth Not Good, Not Good At All
With news that the Canadian GDP growth in the third quarter only increased at 0.6% on an annualized basis, one has to wonder what the number was for Ontario. We won't get the provincial number for a while, however assuming it is close to the federal one, that means with population growth of around 1.2% per year in Ontario, Ontario probably had negative GDP growth per capita, which isn't good for tax revenues or for the deficit.
From the above linked CBC article:
"Statistics Canada said Friday the country's gross domestic product expanded at a 0.6 per cent annualized pace, down from 0.8 per cent during the second quarter because of less investment by businesses and slumping exports.
For comparison purposes, the U.S. economy is currently expanding at a 2.7 per cent annual pace.
Canadian exports shrank by two per cent during the period, the largest decline since the second quarter of 2009."
So the previous quarter also likely had negative GDP growth for Ontario, so it's not a one off. For Ontario, was the decline in exports from manufacturing or petroleum products or a mixture of both? If it is from a decline in petroleum products, Ontario's third quarter performance may not be that bad, if not then Ontario's growth could be the same or worse than the federal number.
From the above linked CBC article:
"Statistics Canada said Friday the country's gross domestic product expanded at a 0.6 per cent annualized pace, down from 0.8 per cent during the second quarter because of less investment by businesses and slumping exports.
For comparison purposes, the U.S. economy is currently expanding at a 2.7 per cent annual pace.
Canadian exports shrank by two per cent during the period, the largest decline since the second quarter of 2009."
So the previous quarter also likely had negative GDP growth for Ontario, so it's not a one off. For Ontario, was the decline in exports from manufacturing or petroleum products or a mixture of both? If it is from a decline in petroleum products, Ontario's third quarter performance may not be that bad, if not then Ontario's growth could be the same or worse than the federal number.
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