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.

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