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.
Wednesday, November 25, 2015
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.
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.
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.
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.
Saturday, October 31, 2015
Ontario Posts 2015 Second Quarter GDP Growth of 1.4%, Revises Up First Quarter GDP to 0%, First Half GDP Per Capita Negative
Ontario posted their second quarter GDP numbers over at the Finance Ministry site. It was 0.4% or 1.4% annualized. Interestingly the first quarter GDP number has been raised to 0.0%, when originally it was -0.2% on an annualized basis, so that's a small positive. With the positive growth in the second quarter Ontario didn't meet the technical definition of a recession of two successive negative quarters.
With growth of 0% and 1.4% in the first two quarters of 2015, that works out to to approximately 0.7% GDP growth in the first half of 2015. That's obviously not that impressive and goes against the narrative that while Alberta is doing poorly, Ontario is doing well. Considering that population growth is around 0.9% annually that means that Ontario actually had a slightly negative GDP per capita in the first half of 2015. That will have implications for Ontario government tax revenues and the deficit.
The finance ministry blamed poor first quarter growth on "unusually harsh weather, supply chain disruptions from the U.S. west coast port labour dispute and retooling at some of Ontario’s auto assembly plants." At the risk of sounding like the Ontarian Zerohedge, winter is cold and snowy in the first quarter and isn't really a surprise. Blaming US west coast stevedores also seems like a bit of a reach.
Some interesting quotes from the finance ministry on the second quarter:
"Capital spending on machinery and equipment decreased 4.9%, the third consecutive quarterly decline, while investment in non-residential construction advanced 4.1%, following a 1.5% increase in the first quarter."
"Businesses increased inventories by $5.8 billion, slowing from an accumulation of $8.4 billion in the first quarter."
"Both exports (+0.7%) and imports (+0.4%) advanced in the second quarter, rebounding from first quarter declines."
The decline in spending on machinery and equipment is depressing given its importance for productivity growth for Ontario and GDP growth per capita. The inventories increasing is also interesting as eventually they will have to normalize. The exports increasing is good although considering the low dollar I'm not sure it is that impressive.
Compared to Canada's overall performance, GDP decreased 0.8% in the first quarter and 0.5% in the second quarter on an annualized basis. So Ontario's growth was 0.8% more than Canada's in the first quarter and 0.9% in the second quarter. In the second quarter, GDP growth in the US was a strong 3.9%, and contracted 0.2% on an annualized basis in the first quarter.
Given that the current Ontario budget document is predicting 2.7% GDP growth in 2015, that seems highly unlikely with around 0.7% growth in the first half. That would require growth of 4.7% in the second half of 2015 which I think most would agree isn't going to happen.
What's next for the third quarter? The initial estimate of the US third quarter growth is 1.5% annualized which is Ontario's largest export market. There are predictions of third quarter growth for Canada of 2.5%, so Ontario as such a large part of the Canadian economy shouldn't be too far off of that. Although oddly the third quarter jobs numbers for Ontario was quite poor, while the second quarter was actually quite good.
With growth of 0% and 1.4% in the first two quarters of 2015, that works out to to approximately 0.7% GDP growth in the first half of 2015. That's obviously not that impressive and goes against the narrative that while Alberta is doing poorly, Ontario is doing well. Considering that population growth is around 0.9% annually that means that Ontario actually had a slightly negative GDP per capita in the first half of 2015. That will have implications for Ontario government tax revenues and the deficit.
The finance ministry blamed poor first quarter growth on "unusually harsh weather, supply chain disruptions from the U.S. west coast port labour dispute and retooling at some of Ontario’s auto assembly plants." At the risk of sounding like the Ontarian Zerohedge, winter is cold and snowy in the first quarter and isn't really a surprise. Blaming US west coast stevedores also seems like a bit of a reach.
Some interesting quotes from the finance ministry on the second quarter:
"Capital spending on machinery and equipment decreased 4.9%, the third consecutive quarterly decline, while investment in non-residential construction advanced 4.1%, following a 1.5% increase in the first quarter."
"Businesses increased inventories by $5.8 billion, slowing from an accumulation of $8.4 billion in the first quarter."
"Both exports (+0.7%) and imports (+0.4%) advanced in the second quarter, rebounding from first quarter declines."
The decline in spending on machinery and equipment is depressing given its importance for productivity growth for Ontario and GDP growth per capita. The inventories increasing is also interesting as eventually they will have to normalize. The exports increasing is good although considering the low dollar I'm not sure it is that impressive.
Compared to Canada's overall performance, GDP decreased 0.8% in the first quarter and 0.5% in the second quarter on an annualized basis. So Ontario's growth was 0.8% more than Canada's in the first quarter and 0.9% in the second quarter. In the second quarter, GDP growth in the US was a strong 3.9%, and contracted 0.2% on an annualized basis in the first quarter.
Given that the current Ontario budget document is predicting 2.7% GDP growth in 2015, that seems highly unlikely with around 0.7% growth in the first half. That would require growth of 4.7% in the second half of 2015 which I think most would agree isn't going to happen.
What's next for the third quarter? The initial estimate of the US third quarter growth is 1.5% annualized which is Ontario's largest export market. There are predictions of third quarter growth for Canada of 2.5%, so Ontario as such a large part of the Canadian economy shouldn't be too far off of that. Although oddly the third quarter jobs numbers for Ontario was quite poor, while the second quarter was actually quite good.
Wednesday, October 21, 2015
Bank of Canada Lowers GDP Growth Projections for Canada for 2016 and 2017
So the Bank of Canada announced today that interest rates would stay the same, which wasn't that much of a surprise. Perhaps more surprisingly, the BoC cut their GDP growth projections for 2016 and 2017. The GDP growth was cut to 2.0% from 2.3% in 2016 and 2.5% from 2.6% in 2017. The 2015 number remained at 1.1%.
I'm not particularly surprised, considering that I don't think that the Ontario economy in its present condition with low productivity growth can grow much past 2% a year. The current Ontario budget predicts growth of 2.7% in 2015, which will be impossible to meet now, with negative growth in the first quarter for Ontario and 1.1% GDP now predicted for the entire country. Job growth in Ontario in 2015 has also been almost non-existent. The budget also predicts GDP growth of 2.6% in 2016, which considering the large part of the economy Ontario makes up of the whole country and growth for the whole country is predicted at 2.0%, seems unlikely. That will have knock on effects on the Ontario budget revenues.
Ontario should be releasing second quarter numbers for GDP soon, which should be interesting.
I'm not particularly surprised, considering that I don't think that the Ontario economy in its present condition with low productivity growth can grow much past 2% a year. The current Ontario budget predicts growth of 2.7% in 2015, which will be impossible to meet now, with negative growth in the first quarter for Ontario and 1.1% GDP now predicted for the entire country. Job growth in Ontario in 2015 has also been almost non-existent. The budget also predicts GDP growth of 2.6% in 2016, which considering the large part of the economy Ontario makes up of the whole country and growth for the whole country is predicted at 2.0%, seems unlikely. That will have knock on effects on the Ontario budget revenues.
Ontario should be releasing second quarter numbers for GDP soon, which should be interesting.
Monday, October 19, 2015
Ontario Peak Electricity Prices Rise 8.7% November 1st 2015, 25% Year on Year, 29.6% in 18 Months
This Global News article reports on the price rises in electricity that occur at the start of November:
"Under the new rules, off-peak hours will increase 0.3 cents to 8.3 cents per kWh, mid-peak hours will increase 0.6 cents to 12.8 cents per kWh and on-peak hours will increase 1.4 cents to 17.5 cents per kWh."
Curiously they can't be bothered to say what the percentage increases are. Peak time prices are actually rising 8.7%, which is quite massive considering that Ontario's inflation is between 1% and 2% and that the price increase follows the one in May, thus it is a 8.7% increase in only six months. Mid-peak prices increased by 4.9% and off-peak prices increased by 3.75%.
Perhaps more curiously the article couldn't be bother to figure out what the year on year increases were. I enumerated the recent price increases in electricity in Ontario in this post. The year on year increase in peak pricing in Ontario for November 1st will be 3.5 cents from 14 to 17.5 cents. That's a 25% year on year increase which obviously is way above inflation. For mid-peak, the increase is 1.4 cents, from 11.4 cents to 12.8 cents, a 12.2% increase. For off-peak pricing, the increase is 0.6 cents from 7.7 to 8.3 cents, a 7.8% increase year over year.
So it would seem the Liberal government of Kathleen Wynne is trying to increase prices of peak electricity relative to off-peak, trying to shift consumption to off peak periods (between 7 pm and 7 am during the November to April time period).
However that's not all. What about the increase over 18 months? On peak pricing increased from 13.5 cents to 17.5 cents, a 4 cent increase or a 29.6% increase over 18 months. Mid-peak prices increased 1.2 cents from 11.2 cents to 12.8 cents or a 14.3% over 18 months. Off-peak pricing increased from 7.5 cents to 8.3 cents, a 0.8 cents increase over 18 months, or 9.4% in percentage terms.
Why the media can't be bothered to go back and look at the increases beyond just the most immediate is somewhat surprising to me. I'm not sure if the reporters are lazy or they are complicit with government and just don't want people to be aware. Probably lazy. One of these days I'll go back and look farther back at electricity price increases in Ontario over the past five years as I'm sure the chart would be interesting.
"Under the new rules, off-peak hours will increase 0.3 cents to 8.3 cents per kWh, mid-peak hours will increase 0.6 cents to 12.8 cents per kWh and on-peak hours will increase 1.4 cents to 17.5 cents per kWh."
Curiously they can't be bothered to say what the percentage increases are. Peak time prices are actually rising 8.7%, which is quite massive considering that Ontario's inflation is between 1% and 2% and that the price increase follows the one in May, thus it is a 8.7% increase in only six months. Mid-peak prices increased by 4.9% and off-peak prices increased by 3.75%.
Perhaps more curiously the article couldn't be bother to figure out what the year on year increases were. I enumerated the recent price increases in electricity in Ontario in this post. The year on year increase in peak pricing in Ontario for November 1st will be 3.5 cents from 14 to 17.5 cents. That's a 25% year on year increase which obviously is way above inflation. For mid-peak, the increase is 1.4 cents, from 11.4 cents to 12.8 cents, a 12.2% increase. For off-peak pricing, the increase is 0.6 cents from 7.7 to 8.3 cents, a 7.8% increase year over year.
So it would seem the Liberal government of Kathleen Wynne is trying to increase prices of peak electricity relative to off-peak, trying to shift consumption to off peak periods (between 7 pm and 7 am during the November to April time period).
However that's not all. What about the increase over 18 months? On peak pricing increased from 13.5 cents to 17.5 cents, a 4 cent increase or a 29.6% increase over 18 months. Mid-peak prices increased 1.2 cents from 11.2 cents to 12.8 cents or a 14.3% over 18 months. Off-peak pricing increased from 7.5 cents to 8.3 cents, a 0.8 cents increase over 18 months, or 9.4% in percentage terms.
Why the media can't be bothered to go back and look at the increases beyond just the most immediate is somewhat surprising to me. I'm not sure if the reporters are lazy or they are complicit with government and just don't want people to be aware. Probably lazy. One of these days I'll go back and look farther back at electricity price increases in Ontario over the past five years as I'm sure the chart would be interesting.
Subscribe to:
Posts (Atom)