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.

Ontario 2015-2016 Budget Predicts 2015 GDP Growth of 2.7%, Will We Reach It?

I just wanted to highlight the Ontario Finance ministry's prediction for Ontario's GDP growth for 2015 contained in the 2015-2016 budget PDF, on page 233. For 2015 the prediction is 2.7% (annualized) followed by 2.2% for 2016, 2017 and 2018.

Considering that the first estimate of US GDP growth just came out this week at a very weak 0.2% and the fact that Ontario and US GDP growth are quite correlated, and that the Atlanta Fed GDPNow model for US GDP growth is predicting US growth of only 0.8% in the second quarter of 2015 as of May 1st, I'm going to go out on a very thick limb and predict that Ontario won't reach GDP growth of 2.7% in 2015. The Atlanta Fed GDPNow model was dead on for its prediction of first quarter growth so I'm inclined to go with their prediction.

If Ontario also has GDP growth of 0.2% in the first quarter, growth would have to average 3.5% in the other three quarters which seems unlikely. Incredibly, there's a RBC prediction of Ontario GDP growth of 3.3% made in March, which now seems incredibly unlikely.

If the AtlantaFed model is correct for US second quarter GDP growth at 0.8% and Ontario's is similar, that would require third and fourth quarter growth of an average of 4.9% which again seems unlikely. So be prepared for revisions for the Ontario's GDP growth in 2015 and following that, less than predicted revenues to the Ontario government. On page 265 of the budget PDF, Ontario is predicting revenue of $124.4 billion in 2015-2016.

2014 Ontario GDP Growth, Second and Third Quarters

I've been meaning to blog about Ontario's second and third quarter GDP growth. The third quarter 2014 numbers were released in January at the Ontario's Finance ministry's site here. 

Third quarter GDP was actually quite good:

"Ontario’s real Gross Domestic Product (GDP) increased 1.0% (4.0% annualized) in the third quarter of 2014, following a 0.8% (3.2% annualized) advance in the second quarter. The strong third-quarter gain was led by higher household and business spending, along with robust export growth."

Note that the first quarter number was considerably less:

"Real GDP grew by 0.1 per cent (0.6 per cent annualized) in the first quarter of 2014." 

So with the three together, that's approximately 2.6% which is impressive by recent Ontario standards of GDP growth. So with any decent growth in the fourth quarter the 2014 GDP number should be over 2%. That's not particularly impressive, but compared to the string of 2% GDP growth numbers the province has been posting the past couple of years, that's something.

However the fourth quarter numbers don't look like they are shaping up that great as made clear in this Financial Post article titled "Canada’s slumping GDP reveals troubles in just about every sector"

From the article it isn't just oil:

"Friday’s GDP report made crystal clear how grimly Canada’s economy — one that contracted 0.2% in November – had been quietly tanking, which contributed to the Bank of Canada’s surprise move last week when it cut its prime setting rate.

While the bleak oil picture was fully developing, the thinking was that Canadians shouldn’t worry about the economy, manufacturing would carry the standard. However, manufacturing output, which accounts for 10.5% of GDP, fell even further than the energy sector, declining 1.9%, even though the Canadian dollar had already begun sliding, according to Statistics Canada."

So if manufacturing is tanking even more than oil, that can't be good for Ontario's fourth quarter of 2014 GDP number. Other industries crucial to Ontario also aren't doing well:

"Concurrently, wholesale trade slumped 0.6% in November, a second consecutive decline following a decrease of 0.2% in October, coupled with a surprising drop in output of 0.4% in the finance and insurance sector, which had previously risen for five consecutive months."

Certainly the Canadian dollar tanking versus the US dollar can help manufacturing, but it takes time to adjust. The fourth quarter GDP number should be interesting to Ontario and considering that a small number of jobs were actually lost in November and December in Ontario, there's not a lot of good signs. Could the fourth quarter numbers even be negative?

The first quarter number for 2015 isn't looking great either. We'll know more when the January employment numbers come out.


 

Martin Regg Cohn Ontario Economy is Great Watch, Climate Change Edition

One thing that Surly Hamiltonian loves to document is the Toronto Star's Queen's Park columnist Marty Cohn's endless predictions that good times are just around the corner for Ontario's economy. Some argue that the Toronto Star is the house organ of the Liberal party both federally and provincially and thus we end up with Cohn's sometimes delusional columns when referring to the Ontario economy.

Annoyingly for Hamiltonians, the fact that the Spectator is under the Torstar aegis means the paper doesn't have their own Queen's Park scribe, so we are stuck with Cohn.

Cohn has a column about the Ontario government coming back to the climate change issue. However he says:

"With the domestic economy rebounding, and global warming talks gaining momentum"

I assume that he's referring to the Ontario economy, since with oil's price crash, the overall Canadian economy isn't looking so great (although it doesn't seem like it will meet the technical definition of a recession).

However how great is the Ontario economy doing right now? Sure the dollar is down as are gas prices. However in fact for Ontario the economy has actually lost jobs in November and December, and the entirety of 2014 wasn't particularly impressive and similar to the previous moribund years after the worst years of the recent recession.

Now I suppose the low dollar and gas prices could mean that in 2015 Ontario will finally have a good GDP year (although maybe Cohn has above 2% GDP growth as his definition of good). People could travel less, both for cross border shopping and foreign vacations and Americans could visit Toronto more giving GDP a boost. I'm skeptical that manufacturing will make much of a turnaround, but rather continue its decline, although not as fast (note that the Mexican peso is also way down versus the US dollar).

The fact that oil is way down has to have some effect on Ontario's economy; the banks are all headquartered here and no doubt will feel some pain. The Canadian stock market performance certainly hasn't been great of late and I don't see it rocketing up anytime soon.

But more importantly, can Ontario's main industry, housing, continue as it has been the past decade? Even a slowdown would cause problems, because Ontario doesn't have a lot of GDP growth coming from other areas. I doubt it will collapse as the Ontario population continues to increase through foreign rather than intra-provincial migration, but the limits of people's ability to pay based on their income is being tested.

One final point. Cohn could possibly be right that the Ontario economy is rebounding. But he's banged that drum so long, that he's like an economist who has predicted n of the last m recessions, where n >> m.

   

Where's the Ontario Finance Ministry First Quarter of 2014 GDP Numbers?

Last year on this date, the Ontario Finance Ministry released their financial update which included the first quarter of 2013 GDP growth numbers. I checked today and nothing yet. The first quarter numbers should be quite interesting and should shed some light on whether the province will make it's prediction for overall 2014 GDP growth of 2.1%.

Ontario Finance Ministry Budget Projections of GDP Growth, 2013 Versus 2014

The actual numbers for GDP growth for 2012 and 2013 for Ontario were both 1.3% (2011's seems to be 2.2% from the 2014 budget document). To preserve what the Ontario Ministry of Finance thought about future GDP growth in the 2013 budget:

2013 1.5%
2014 2.3%
2015 2.4%
2016 2.4%.

We now know that it was actually 1.3% in 2013. What are the predictions in the 2014 budget document?

2014 2.1%
2015 2.5%
2016 2.5%
2017 2.6%

So the 2014 projection was lowered by 0.2% while the next two years had theirs raised 0.1% each, almost like the finance ministry was trying to balance things out. 

The first quarter GDP growth number comes out in August some time for Ontario. Considering that Canada overall was mediocre and Quebec was high and the US low (-2.9%) Ontario's should at least be interesting. Ontario's overall 2014 number should be interesting as well, as even the lowered 2.1% might not be possible. 2015 should be interesting too. If 2014 is weak, why should Ontario expect 2015 would be 2.5%

Mexican State GDP Growth

Surly Hamiltonian is mostly interested in Hamilton and Ontario, but also Canada and the US since it is so large. Why not Mexico too?

A recent topic of many posts here has been Ontario's GDP growth versus Canada and Alberta and the other provinces. In Canada there's major differences in GDP growth between the provinces. Alberta's 2013 GDP growth was 3.9% versus 1.3% for Ontario.

Just like Canada, Mexico is not a monolithic entity and their states vary in GDP growth. Cherokee Gothic has a nice map with Mexican GDP growth per state here.

The takeaway? Campeche apparently sucks. And Mexico has way bigger differences between states than Canada.

Quebec's First Quarter 2014 GDP Growth is Improbably 2.4%, What Does Portend for Ontario's First Quarter GDP Growth

Quebec's 2014 first quarter GDP growth number is out and in a big surprise to me, is apparently 2.4%. Now I don't follow Quebec's numbers as closely as Ontario's, but given that Canada's number as a whole for the first quarter of 2014 has been estimated at 1.2%, 2.4% is a big surprise to me. Well done Quebec. Especially since the US revised number was -2.9% in the first quarter.

What does this mean for Ontario's first quarter of 2014 GDP growth? I somewhat assumed that Quebec's wouldn't be that great and would be closer to Ontario's. However if Quebec's is that much more than Canada's, some province has to be less than 1.2%. I'm guessing that Alberta's and Saskatchewan's numbers for the first quarter won't be terrible and the rest of the country's GDP proportion is relatively small. So that leaves Ontario, with weak US GDP numbers and employment numbers for the first quarter.

What's up with the difference between Ontario and Quebec? I'm not sure. Perhaps Quebec's exports of jets has been better than Ontario's exports of cars? Certainly though, industrial electricity rates in Quebec are considerably lower than Ontario's now, so perhaps it is that manufacturing hasn't cratered as much as in Ontario. Certainly manufacturing can be good for productivity growth and thus GDP growth per capita and similarly for GDP growth overall. Something that somebody should look into. Maybe manufacturing employment over the past ten years or so in both provinces. That's expecting a lot from Ontario's media though.

April 2014 Canadian GDP Disappoints, What About Ontario and Martin Regg Cohn Says Don't Worry, Wynne Will Balance 2017-2018 Budget

A bit of a long blog post title, but I'm going somewhere with it. Plus there's something I want to record for posterity.

I'm not certainly not the first prognosticator in North America to say that GDP growth in the next few years is going to be disappointing. However I'm one of the rare few that focuses on Ontario's GDP growth, which unfortunately for Ontarians doesn't often get a lot of focus. Not even in the most recent election campaign.

We have already covered here the fact that Canada had 1.2% GDP growth in the first quarter of 2014 and that combined with US GDP growth of -2.9%, that can't be good for Ontario. Canada's GDP growth for the fourth quarter of 2014 was 2.9% while Ontario's was 1.9%. Ontario also suffered the same bad winter as the rest of the US. That's however in the past, although we won't know Ontario's first quarter number until August.

On both sides of the border, some have been predicting a rapid snap back in the second quarter of 2014. Estimates are now out for Canada's April GDP numbers and they are disappointing:

"Statistics Canada said Monday the economy grew by 0.1 per cent in April, the same pace as in March.

Economists had expected a gain of 0.2 per cent, according to Thomson Reuters."

“Even if some of April’s weakness should prove temporary, and thus likely to influence the next month’s readings positively, the disappointment means that growth is likely to come in closer to two per cent than 2.5 per cent (the Bank of Canada’s prior forecast) in the second quarter,” Exarhos wrote in a note to clients."

So no snap back and a reduction of an estimate for Canadian GDP growth to 2%. Considering the recent relationship between Canadian and Ontario GDP growth, the 2014 full year GDP growth for Ontario will probably be less than 2%. Which isn't good coming off two years in a row of 1.2% GDP growth. Plus considering the recent ratcheting up of oil prices due to the murk that is Iraq, June probably isn't going to be a great month for GDP in Ontario and if the relatively high prices continue into the third quarter, Ontario's third quarter GDP probably won't be any great shakes either.

Now on to Toronto Star columnist Martin Regg Cohn and the Ontario Liberals and posterity. Cohn has recently wrote two columns, one where he tells the Ontario PCs that come around the next election that the budget will be not just be balanced, but in surplus:

"By the 2018 campaign, the budget will be mostly likely in surplus (see: Paul Martin)."

Wow. The Liberals have been saying for quite some time that the 2017-2018 will be balanced, and Cohn here is likely referring to the 2018-2019 budget. Still that's astonishing and that assertion needs to be preserved and remembered and referenced when that time finally rolls around. Cohn as a backup for that refers to another column, entitled "Kathleen Wynne won't back down on activist plan", which has the text "And she stands by her promise to wipe out Ontario's deficit within three years."

Well that settles it. Wynne says she will balance the budget in fiscal year 2017-2018 and Cohn assumes that will happen and it apparently has something to do with Paul Martin.

The thing is, Ontario's GDP growth has been woeful for some time and all indications are it will continue to be woeful in the future. Balancing the Ontario budget in 2017-2018 requires some assumptions of decent growth that just aren't going to happen. There may not be new money for public sector unions, but in reality there will be less money.

Surly Hamiltonian will be continuing to follow Ontario's GDP growth and deficits and will also periodically check in on Cohn's assertion that by the 2018 the budget will most likely be in surplus.

 

First Quarter 2014 US GDP Growth Revised to -2.9%, What Does that Mean for Ontario?

So in the final revision, US GDP growth was revised to negative -2.9%. That's apparently the worst quarterly decline in a quarter that isn't part of a recession. We've been tracking the US number to try and help estimate the Ontario number (an estimate of which won't come out until August, conveniently well after the election).

Canadian GDP growth was only 1.2% in the first quarter. That's the only number I've heard quoted; does Canada do revisions? Given the fact that US GDP declined so much it isn't a huge surprise GDP growth was so low in Canada.

We've previously wondered if Ontario GDP growth in the first quarter would be negative, with this new revision of US GDP growth that likelihood has gone up. If we weren't lazy, we would try and collection GDP quarterly numbers, for Canada, the US and Ontario and try and make an estimator given Canadian and US numbers for the Ontario number.

Alberta growth probably wasn't that bad in the first quarter and Ontario also had bad weather like the US, so to get to 1.2% Canadian GDP growth, Ontario's pretty much has to be sub 1%, which given population growth of around 1% means negative GDP growth per quarter.

What does this mean going forward? There could be a snapback quarter in the second for the US and Ontario. However oil and hence gasoline is relatively high again at the end of the second quarter and will likely stay high for the rest of 2014. High oil prices aren't good for Ontario's economy obviously.

What about 2015? I can't think today's news bodes well for that.

New York Times Article "The Downward Ramp" and Ontario

There's a good New York Times article called "The Downward Ramp" about a study about negative happenings in the US employment market, especially for college graduates. The whole article is good, but I was interested in these two particular paragraphs:

"This possibility has been explored from various angles by Robert Gordon, an economist at Northwestern; Lawrence Summers, the former secretary of the Treasury, now at Harvard; and Erik Brynjolfsson and Andrew McAfee at M.I.T. who wrote “The Second Machine Age.”

Gordon’s prognosis is perhaps the bleakest: “The future of American economic growth is dismal, and policy solutions are elusive.”"

One of the themes of this blog has been that Ontario's GDP growth per person (related to productivity growth) has been dismal since the Mike Harris years and that a lot of Ontario's economic growth has just been from an increasing population.

Considering that if the US is struggling with the same problems, that's not good news for Ontario. First Ontario still depends a lot on US economic strength for its economy. Second, if anything Ontario is probably doing worse with regards to productivity growth than the US, as government policies during the Liberal era have focused on increasing the contribution of the provincial government to the overall economy and our manufacturing portion of the economy (often a source of productivity gains) has basically collapsed (partly due to high electricity prices engineered by the Ontario government although most is due to factors the government can't control like 9/11 and global outsourcing). Hiring more teachers per pupil is obviously bad for productivity and there's not a lot of evidence that more teachers per pupil has improved student performance considering the most recent PISA results (actually judging by PISA results it appears to make them worse).

I particularly like the quote “The future of American economic growth is dismal, and policy solutions are elusive.” To me that describes what has been happening in Ontario. Economic growth has been dismal and the Liberal government has been flailing around trying to deal with this reality and has tried everything from "green energy" to funding MaRS, which are ultimately peddled by modern day snake oil salesmen (i.e. Richard Florida) trying to get some money out of a fading economic power desperate for a magic bullet.

The safer assumption is that these policies will not work and Ontario's GDP growth per capita will be weak. Compounding the problem will be people voting with their feet to move to the greener economic pastures of Alberta, driving down economic growth from population growth. Taking the advice of Public Enemy, don't believe the Ontario finance department's hype of Ontario's growth over 2.5% in the next couple of years.

2013 Ontario Fourth Quarter GDP Growth Increases 1.9%

I've been speculating in other posts about Ontario possibly having a poor first quarter of 2014 GDP growth figure. However the Ontario Finance Ministry has finally gotten around to releasing the fourth quarter of 2013 numbers and the also the 2013 as a whole.

Fourth quarter growth was 0.5% (1.9% annualized) which is actually better than what I was expecting. However considering population growth is around 1% per year for Ontario currently, GDP growth per captia was again weak. The full year for 2013 number was 1.3%, which is apparently the same as 2012. There's a graph showing GDP growth per quarter which strangely seems to make 2012 growth look worse than 2013, but I digress. Regarding the full year GDP growth number of 1.3%, with population growth in Ontario of around 1% (according to Statscan for 2011 via Wikipedia), that means that GDP growth per capita was close to zero for 2013. As an aside, that means raises for public sector workers should have been around whatever Ontario's inflation rate was (the Ontario consumer price index change for Ontario for 2013 was 1.0% according to Stats Canada).

How does this compare with Canada's growth rate in 2013 overall? Well Canada's GDP grew by 2.0% in 2013 so at 1.3%, Ontario was dragging down the rest of the country. For the fourth quarter, Canada's GDP growth rate was 2.9% so again Ontario at 1.9% dragged down Canada.

Considering Canada only grew by 1.0% in the first quarter, and the US decreased by 1.0%, there's a good chance Ontario's GDP growth will be negative. The finance ministry released the fourth quarter numbers in May, so we're probably waiting until August for the fourth quarter numbers, well after the election, probably to Kathleen Wynne's benefit and the Ontario Liberals.

Here's some of the data regarding posted on the Finance Ministry's website for the fourth quarter in case it disappears down the memory hole:

Fourth QUARTER (OCTOBER-DECEMBER) 2013 SUMMARY

• Ontario’s real Gross Domestic Product (GDP) increased 0.5% (1.9% annualized) in the fourth quarter of 2013, matching the third quarter increase.
• Real consumer expenditures rose 0.3%, following a 0.7% gain in the third quarter.  Clothing and electricity purchases increased while spending on most other categories of goods declined in the quarter. Spending on services rose 0.4%, after increasing 0.6% in the third quarter.
• Real investment in residential construction declined 0.6% in the fourth quarter, the third consecutive quarterly decrease.  A 3.5% decline in home ownership transfer costs and a 0.6% drop in new housing construction was partially offset by a 1.1% advance in renovation activities.
• Real business investment in plant and equipment declined 3.3%, following a 1.8% drop in the third quarter.  Investment in non-residential construction (-3.1%) and machinery and equipment (-3.4%) were both lower in the quarter.
• Businesses increased inventories by $6.9 billion ($2007), after accumulating $2.9 billion worth of stocks in the third quarter.
• Real exports increased 0.8%, following a 1.1% decline in the third quarter.  Imports increased 0.7%, following a 1.2% drop in the third quarter.
• Current dollar GDP rose 0.7% in the fourth quarter, increasing from a 0.6% pace in the third quarter.  Economy-wide prices, as measured by the GDP implicit price index, rose 0.2%.
• Economic production, measured on an industry basis, also grew 0.5% in the fourth quarter of 2013. Production by goods-producing industries advanced 0.6%, while output by services-producing industries rose 0.5%. 

And the full 2013 year facts:

• Ontario’s real GDP increased 1.3% in 2013, matching growth in 2012.
• Final domestic demand* rose 0.4% in 2013, slowing from growth of 1.3% in 2012.
• Real consumer spending grew 1.8% in 2013, accelerating from a 1.4% increase in 2012.  Personal spending on semi-durables (+3.2%) and durables (+2.5%) led growth while spending on non-durables (+1.6%) and services (+1.6%) also advanced.  Consumer purchases of food and beverages, clothing and footwear, natural gas and electricity all increased in 2013, while spending on furniture and appliances and gasoline declined.  Consumer spending on motor vehicles rose modestly in 2013.
• Capital spending on machinery and equipment declined 3.8% in 2013, after rising 2.0% in 2012.  Investment spending on non-residential construction decreased 8.0%, following a 1.6% decline in 2012.
• Investment in residential construction fell 2.2% in 2013, the first annual decline since 2009.  The decline was driven in large part by a 6.4% drop in new housing construction.  Home owner transfer costs also decreased, falling by 1.0% in 2013 while renovations activity rose 1.7%.
• Exports grew by 1.1%, while imports declined 0.6% in 2013.  As a result, net trade made a significant contribution to overall growth.
• Current dollar GDP increased 2.7% in 2013, following a 3.0% advance in 2012.
• Employee compensation increased 2.7%, with wages and salaries rising 2.6%.  Wages and salaries in the services-producing industries rose 2.8%, and were up by 2.0% in goods-producing industries in 2013.
• Inflation, as measured by the implicit price index for GDP, slowed from 1.7% in 2012 to 1.3% in 2013.  Consumer prices rose by 1.1%, easing from a 1.3% advance in 2012.  Both export prices (+0.9%) and import prices (+1.6%) increased in 2013.
• Household disposable income rose 2.6%, after increasing 2.5% in 2012.  Ontario’s personal savings rate declined to 4.7% from 5.0% in 2012, as current dollar final consumption (+3.0%) grew at a faster pace than household disposable income in 2013.
• The net operating surplus of corporations decreased by 1.3% in 2013, after falling 1.0% in 2012.
• Real output measured on an industry basis rose 1.4% in 2013, matching the 2012 gain.

Canadian GDP Growth Only 1.2% in First Quarter of 2014, What Will Ontario's Be?

Not great news for the Canadian economy. From this National Post article:

"Gross domestics product, the broadest measure of the country’s economic activity, rose by just 1.2%, on an annualized basis, in the first quarter — well below private-sector estimates.

It was also the smallest quarterly increase since 0.9% recorded in the fourth quarter of 2012, Statistics Canada said Friday.

Economists had forecast 1.8% annualized growth in the first quarter. Even so, Canada managed better than the U.S. between January and March, which posted an annualized decline of 1% for the quarter."

Obviously it was a relatively harsh winter, especially in Southern Ontario and Quebec which probably depressed economic performance. The fact the US actually declined significantly in the quarter didn't help either.

Ontario takes a while to release their quarterly GDP numbers, however considering the US negative numbers, Ontario probably underperformed the Canadian 1.2% average. Enough to be slightly negative for the quarter? That's an interesting question, but one that won't be known until after the election.

Ontario Finance Minister Sousa: Ontario's GDP Growth Next 20 Years Sucky, Deficit Slightly Down?

Ontario Finance minsiter Charles Sousa (any relation to John Philip?) spoke today about Ontario's finances. The Star has a recount of the event here. Noteworthy was this:

"It cites an aging population and slower expansion of the workforce, which “may restrain future economic growth in the absence of significant productivity improvements.”

“The report indicates the need for consistency, predictability and steady hands,” said Sousa, who is to table a budget in May that could trigger a June election.

The economic outlook calls for an average of 2.1 per cent annual growth in real GDP through 2035."

As I've previously posted, I'm shocked that anyone is shocked that Ontario is going to have low GDP growth in the future. Historically, Ontario hasn't had good GDP growth since the Harris years and this prediction is more of the same. I was a little surprised by this quote:

"Despite a growth prediction that barely exceeds inflation, Sousa maintained that the provincial budget will be balanced by 2017-18.

He is to deliver a revised deficit figure on Thursday that will be slightly lower than the $11.7 billion forecast."

Getting to zero deficit by 2017-2018 to me seems very difficult at this point in time, with stagnant GDP growth and rising health costs. Sousa most likely isn't going to be around for that budget so I guess he can say what he wants. I'm assuming that the $11.7 deficit figure refers to the fiscal year that just finished a couple of days ago. I'm a little surprised it doesn't come in higher than predicted, although lately the provincial government has been giving worse predictions for the budget and then beating them slightly, which would appear to be the case here. 

This finance ministry document has some relevant data which shouldn't disappear into the memory hole. The 2012-2013 interim deficit was 9.8 billion, with the 2013-2014 deficit estimated at 11.7 billion, with further predictions of 10.1 for the 2014-1015 fiscal year and then predicted deficits of7.2, 3.5 in future years and a surplus of 0.5 billion in the 2017-2018 fiscal year.

One interesting thing about those deficit predictions is that a reserve was introduced in the 2013-2014 fiscal year prediction. For 2013-2014 year the reserve was 1.0 billion with reserves of 1.2, 1.2, 1.5,  and 1.5 in future years. So in actuality the predicted deficit for 2013-2014 is really 10.7 billion. So if the 2013-2014 deficit is announced at more than 10.7 billion it is actually worse than predicted. For 2014-2015 the actual predicted deficit is 8.9 billion, followed by 6.0 billion, 2.0 billion and then a surplus of 2 billion in 2017-2018.

Other data is provided in the finance ministry document. Program spending interim for 2012-2013 is 113 billion, and estimated at 117.0 billion for 2013-2014. Future years have program spending estimates of 118.3, 118.8, 118.8 and 118 billion in 2017-2018. You'll notice that for four years in a row spending is predicted to be flat. That seems incredibly unlikely, especially considering recent spending increases like the OPP's 8.5% pay increase effective January 1st 2014.

Income information is also specified. For 2012-2013 the income was 114.2 billion and then estimated at 116.8 billion for 2013-2014. For following years the income estimates are 120.5, 124.9, 130.1 and 134.4 billion in 2017-2018.  It should be interesting to see what program spending ends up coming in at for 2013-2014 and what the prediction is for 2014-2015.

Canada's November GDP Growth 0.2%, What will December's Numbers be for Ontario?

Canada reported 0.2% GDP growth in November according to this Financial Post article. What I found most interesting from the article was this:

"The overall increase in gross domestic product was in line with forecasts, while still below the previous month’s pace of 0.3%.

“The three-month trend in growth is now running at a nifty 3.8% annualized clip,” said Douglas Porter, chief economist at BMO Capital Markets.

“However, we look for a setback in next month’s report, as the brutal December weather — notably the ice storm in Ontario — is expected to produce a GDP decline for that month.”"

If GDP growth for December is negative for the country because of the ice storm, how bad will it be for Ontario? We've already seen 39,000 jobs lost in Ontario in December, so we can assume it will be quite poor and hence the overall fourth quarter numbers will be poor. One bright spot could be that hiring was suppressed in Ontario in December and will bounce back strongly in January. Those numbers should be out soon.

Canada's overall GDP growth was 2.7% in the third quarter of 2013, compared to 2.3% for Ontario (from the Ontario Finance Ministry's website, released in January 2014):

"Ontario’s real Gross Domestic Product (GDP) increased 0.6% (2.3% annualized) in the third quarter of 2013."

Better GDP Performance for Canada in Q1 2013?

Here's a Star article about the Bank of Canada expecting performance in Q1:

"And, as Carney noted Wednesday, economic expansion in Canada appears to have been stronger than expected in the first three months of 2013. Growth in the first quarter of the year is expected to have been between 2.3 per cent and 2.5 per cent. Statistics Canada will release the latest growth number on Friday."

That's better than I was expecting, especially considering the Q1 employment numbers were quite mediocre. Part of this growth might be from higher prices for oilsand oil, where prices have converged to West Texas Intermediate prices from Q4 2012. If that's the case, I would expect Ontario's growth to be weaker and Alberta's stronger. We won't know the Ontario breakdown today when the feds release their number, but we might be able to infer some information from all the federal numbers.

Manufacturing Down in March

Here's a Financial Post article on a decline in manufacturing activity in Canada in March.

"The RBC Canadian Manufacturing Purchasing Managers’ Index was at 49.3 last month after adjusting for seasonal variation, down from 51.7 in February. A reading above 50 represents expansion, while a number below 50 means contraction."

I'm interested in these numbers mainly because I'm trying to get a sense of GDP growth in Canada and Ontario in Q1 2013. The last two quarters of 2012 had weak growth (1% or less and less than population growth) and it is important to know whether Q1 was also weak. Another weak quarter would have a big impact on federal and Ontario government revenues (as already has been seen in the just released federal budget). Q1 looks better than the previous two, especially with the US economy picking up, but these weak numbers for March manufacturing make me wonder how strong the GDP number will be.

We should know the federal number soon. I'm going to guess 1.5.

Canada 4th Quarter GDP Number Out and It's Not Good

Canada's fourth quarter GDP number is out and it isn't good:

Statistics Canada said Friday that gross domestic product edged up 0.2% in the fourth quarter of 2012, the same pace as the July-to-September period. On an annualized basis, the economy grew by 0.6% in the fourth quarter, compared with 0.1% in the United States, which annualizes all of its quarterly growth numbers.

Canada’s fourth-quarter annualized growth was the weakest since a 0.8% decline in the second quarter of 2011, which was heavily impacted by the tsunami in Japan. Meanwhile, third-quarter annualized growth was 0.7%, which was down from 1.9% in the second quarter and 1.2% in the first three month of 2012.

Together, those two quarters reflected the poorest economic performance for Canada since the 2008-09 recession.

So 0.6% on an annualized basis which was worse than the 0.7% of the previous quarter. That's not going to be good for government revenues. Considering Canada's population growth is around 1.2% on an annualized basis, that means for two quarters, GDP per capita has dropped slightly. It will be a while before Ontario's numbers for the fourth quarter are out, however considering Ontario's GDP growth was 0.1% (non-annualized) in the third quarter and thus  underperformed the Canadian economy as a whole in the third quarter (0.2%) it is likely that Ontario was probably around 0.1% again (non-annualized). 

The 2013 first quarter numbers aren't looking particularly good and with high gas prices back in Ontario in February, that doesn't bode well for consumer spending. If the first quarter numbers are similar to the third and fourth quarter numbers, that will be three quarters of weak growth for Ontario and can't be good news for the Ontario budget for the 2012-2013 fiscal year. Expect more government freezes in Ontario, including when the teachers' contracts are up in August 2014. That won't be pretty.

Bad Quebec First Quarter GDP Growth

Here's a National Post article reporting Quebec's GDP growth in the first quarter:

The province’s gross domestic product grew by 0.2% in the first quarter of 2012, the same as the two quarters before, according to data released Thursday by Quebec’s government statistical agency. Its 0.6% annualized growth rate for the first three months of the year compares to 1.9% for Canada as a whole.

Wikipedia's reports Quebec's population growth rate at 0.7% a year in 2006. So for the last three quarters, GDP growth per capita in Quebec has been basically zero. Considering the student disruptions recently I can't see the second quarter number being that great either. Quebec has actually done a reasonable job in reducing their deficit, mainly by raising taxes. I'm wondering if this has been impacting GDP growth of late.

Hopefully Ontario's number for the first quarter will be out soon. I'm very curious to see that. Quebec's bad number is clearly dragging the Canadian number down. I doubt Ontario's number will be as bad as Quebec's, but you never know.