Is Ontario’s Economy Growing?

An op-ed piece in today’s Ottawa Sun by Candice Malcolm of the Canadian Taxpayers federation finally motivated us to tackle an issue we’ve been nibbling at for a while. Candice states: There’s no denying the current strength of Ontario’s economy … And this kicked our contrarian nature into high gear: ‘how does she know that and can it be denied?’ Until we see better data, our take on it based on employment data is that it is not growing. Let’s find out if we’re right.

The Data Problem

The standard measure of economic growth is gross domestic product (GDP). The Ontario government does publish GDP data for the province that can be ferreted out. Annual figures are found at the Ministry of Agriculture, Food and Rural Affairs of all places as well as at Statistics Canada (see Figure 1). The latest figures published from these sources are for 2013. Annual data is fine for seeing where you’ve been but are useless for figuring out where you are right now and where you’re headed.

Figure 1. Provincial and Territorial Economic Accounts Review – 2013 Estimates

Source: Statistics Canada

From this we see that Ontario ranked 9th among the provinces and territories in terms of growth in 2013. But how is it doing now?

The Ontario Ministry of Finance’s quarterly Economic Accounts gives quarterly income-based nominal GDP figures in their Table 1 of 1.1%, 0.9% and 1.5% for the first three quarters of 2014. On the main page of the report they give real (i.e. inflation adjusted) GDP figures of 0.2%, 0.8% and 1.0%. Annualized this represents a growth of 2.7%, an improvement over 2013.

This is moderate growth. The question is what is the impact of the falling dollar and the recent drop in oil prices on the economy? The government is predicting a positive impact on this growth.

Other Measures of Economic Growth

Quarterly economic growth data is still not useful for determine what the current state of the economy is. Ideally we would have weekly data available but would settle for monthly data. If no one is publishing monthly provincial GDP figures we can use other monthly data that suggest how the economy is performing.

Consider CANSIM Table 304-0015, Manufacturing sales, by North American Industry Classification System (NAICS) and province monthly (dollars x 1,000). Total sales by month for the last year (October is the last datum) are shown in

Figure 2. Manufacturing sales, by NAICS for Ontario

Ontario manufacturing

Source: CANSIM Table 304015

A trend line drawn in Figure 2 would suggest a modest increase in sakes for the year. We can get a better idea of monthly variation by drawing a graph showing the percent change in sales, month-over-month, shown in Figure 3.

Figure 3. Manufacturing sales, percent change from previous month

man sales

Figure 3 shows strong third quarter growth after an uncertain first half of the year. Our real interest is in 4th quarter performance but with only October data available we can say that there was slight growth bit no trend for the quarter yet.

We do have another measure of the manufacturing sector that is complete for the quarter. This is the RBC Purchasing Managers’ Index (PMI) (for release times and dates got Markit press releases). In a January 2, 2015 News release, they summarize the state of the country as a whole as:

“The PMI continues to register improvement in manufacturing business conditions, though it finished the year slightly lower than the last few months – at 53.9 – indicating some moderation in the pace of improvement in December,”

In a Regional Highlight they give the index values for October through December as 56.4, 57.1, and 55.6. A value of 50 means no growth r improvement in the sector. Values greater than 50 mean manufacturing is growing while values less than 50 mean it is shrinking. So we see steady moderately strong growth around the 56.4 value.

If it were collected in a regular and timely manner, sales tax receipts would be an excellent indicator of consumer spending and a good indication of economic conditions since consumer spending is the largest part of GDP (about 70% in the US).

Table 282-0069 Labour force survey estimates (LFS), wages of employees

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