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Ontario economy – June 2017

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This presentation gives you a quick look at the economy for Ontario

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Ontario economy – June 2017

  1. 1. Ontario Economy – June 2017 By: PaulYoung, CPA, CGA Date: June 25, 2017
  2. 2. PaulYoung, CPA,CGA  Bio  26+ years of business experience  8+ years in academia  20+ years as CPA/CGA  11+ years in analyzing government policies  11+ years working on financial solutions  15+ years in corporate reporting and analysis, taxation, business process change, risk management, budgeting and costing  Contact: Paul_Young_CGA@Hotmail.com
  3. 3. Agenda  OntarioGDP  GDP Growth numbers  Ontario Manufacturing  Competitiveness  Housing Starts  Retail Sales / August 2016  Household Spending / 2014  Employment  Ontario Deficit  Statement of Financial Position
  4. 4. OntarioGDP Facts – Ontario • Largest GDP in Canada or about 36.6% of total GDP in Canada • Key Sectors • Automotive • Steel Production • Metal Fabrication • Food Processing • Forestry • Mining • Pharmaceutical Source – Stats Canada
  5. 5. OntarioGDP Source – Stats Canada Ontario's GDP rose 2.6% in 2016, following the same gain in 2015. Service-producing industries (+3.0%) contributed more to the growth than goods-producing industries (+1.3%). A robust housing market led to a 7.5% increase in residential construction and influenced gains in banking services, lessors of real estate, real estate agents and brokers, and insurance carriers. Total construction activity (+1.6%) was tempered by declines in engineering construction and, to a lesser extent, non-residential construction. Wholesale trade grew 3.9% and retail trade advanced 3.5%, with growth reported in all but one trade industry. Professional, scientific and technical services were up 3.7%, largely on increased activity in computer systems design and related services. Financial investment services, air and truck transportation, as well as, federal government public administration contributed to the growth. Manufacturing increased 1.8%, following a 1.1% gain in 2015. Increases in output were reported by motor vehicle parts, food products, plastic products, primary metal products, and pharmaceuticals and medicines manufacturing. Fabricated metal products, petroleum and coal products as well as printing and related products declined. Electric power generation, transmission and distribution increased 3.0%. Low metal ore prices contributed to a significant decline in support activities for mining, with activity in this industry down 85% from its peak in 2012.
  6. 6. GDPGrowth Projections Source: http://www.rbc.com/economics/economic-reports/pdf/provincial- forecasts/ont.pdf
  7. 7. Ontario Manufacturing Source – Stats Canada
  8. 8. Ontario FDI Source: http://forms.fdiintelligence.com/report2016/files/The_fDi_Report_2016.pdf Facts: • Texas has low tax and no state income tax (http://www.bankrate.com/fin ance/taxes/state-with-no- income-tax-better-or-worse- 1.aspx) • NewYork has made changes to corporate tax. NewYork has received power from Ontario (http://www.torontosun.com/ 2015/08/12/ontario-taxpayers- spend-200-million-on- exported-electricity-in-june • California investment is related to clean energy project.
  9. 9. Key comments Ontario Economy  Ring of fire - http://www.cbc.ca/news/canada/thunder- bay/thunder-bay-ring-of-fire-1.3806947 (issues with transportation)  Automotive / Chrysler - http://www.theglobeandmail.com/report- on-business/ontario-policies-could-put-auto-making-at-risk-fiat- chrysler-ceo-warns/article25418311/ (hydro rates)  Forestry Sector - http://www.cbc.ca/news/canada/thunder- bay/hornepayne-lumber-mill-shutdown-1.3357255 (Heading into the holiday season, nearly half of the workforce in Hornepayne, Ont., is without a job because of layoffs at the mill, which were announced two weeks ago and could become permanent.The co- generation plant at the Olav HaavaldsrudTimber Company needs to sell more power to the provincial grid, in order to turn a profit. But so far, the Ontario government is saying no.And that means no work, and no jobs.
  10. 10. Ontario competitivene ss – Hydro Rates  Hydro Rates - http://www.forbes.com/sites/judeclemente/2016/03/30/ontarios- high-electricity-prices-crush-business/#3fae312f2fa8 key Quotes “High cost electricity is “unavoidably harmful” because electricity is indispensable: “electricity cannot not be used.”Today, Ontario has had “the highest industrial rates in North America,” far higher than neighbors using low cost natural gas. With prices increased again in November, ratepayers are “angry, confused.” “How Ontario lost 300,000 manufacturing jobs (and why most aren’t coming back).” “Ontario drives manufacturers away with overpriced electricity.” These industry losses are particularly harmful: manufacturing supports high-paying jobs and has extensive “multiplier effects,” that ripple benefits across the entire economy. Devastating the auto sector in particular, “the main reason for soaring costs — and plummeting employment — is the high cost of electricity as a result of the Green Energy Act.”
  11. 11. Ontario competitiveness – RedTape Source - =CFIB
  12. 12. Ontario Competitivene ss
  13. 13. Ontario Competitivene ss - Recommendat ions  Source - https://www.utoronto.ca/news/ontario%E2%80%99s- thriving-%E2%80%9Ccluster%E2%80%9D-regions-can-grow-our- economy-institute-competitiveness-and
  14. 14. HousingStarts Source: www.rbc.com
  15. 15. RetailSales Source – Stats Canada Retail sales were up in seven provinces in April. Higher sales in Ontario and Quebec accounted for the majority of the increase. Ontario (+1.1%) reported the largest growth in dollar terms, as gains were observed in 9 of 11 subsectors. Following two months of declines, Quebec recorded a 1.6% increase on the strength of gains across most store types.
  16. 16. Household Spending Facts: • Food costs are the lowest in Ontario • Carbon taxation/Price of Carbon will increase food costs by 6-8% - http://www.slideshare.net/paulyoungcga/carbon-tax-or-carbon-pricing- impact-on-consumer-good-prices-for-canada • Households in Ontario spend on average 31.5% on shelter. • Ontario has some highest hydro rates in Ontario. It is not on unheard to have $400-500 monthly bills - http://www.torontosun.com/2016/10/28/5- ontario-hydro-bills-compared-rural-bills-in-the-hundreds-while-toronto- brothers-pay-100 or http://www.owensoundsuntimes.com/2016/10/24/even-greenest-of- grocers-burned-by-hydro-costs
  17. 17. Employment Employment: • Employment declined by 17,000 in finance, insurance, real estate, rental and leasing, the first notable decrease since November 2015. Ontario accounted for all of the decline in May. Despite fewer workers in May, employment in the industry was up 38,000 (+3.4%) compared with May 2016. • Employment in health care and social assistance increased for the second consecutive month, up 15,000 in May.The lion's share of the increase was in Ontario.The added employment in May boosted total gains at the national level for the industry to 63,000 (+2.7%) from May 2016. • In wholesale and retail trade, employment increased for the third time in four months, up 15,000 in May, powered by gains in Ontario. On a year-over-year basis, there were 74,000 (+2.7%) more people employed in the industry.Wholesale and retail trade continued to be the largest industry group by employment, accounting for an estimated 2.8 million people or 15.3% of all workers. Source: Stats Canada
  18. 18. Where are the jobs Source: http://careers.workopolis.com/advice/canadas-hiring- outlook-for-2016-where-the-jobs-will-and-wont-be-created/
  19. 19. Government Deficit Source – Government of Ontario
  20. 20. Government Deficit Source – Government of Ontario
  21. 21. Government Debt Source – Government of Ontario
  22. 22. What’s next  Ontario – area of focus  Low dollar has insulated Ontario from global pressures  High hydro rates are impacting business investment - http://www.occ.ca/portfolio/empowering-ontario/  RedTape is delay projects (http://business.financialpost.com/news/mining/what- ontario-needs-to-unlock-ring-of-fires-mineral-wealth-is-a-marshall-plan  Broken arbitration system (http://www.cfib-fcei.ca/english/article/6069-government- wages.html  Carbon taxation (https://www.thestar.com/business/2016/10/04/how-trudeaus- carbon-price-plan-will-affect-five-canadian-industries.html or  Innovation spending (http://www.theglobeandmail.com/report-on- business/economy/canada-falling-behind-in-research-and- development/article21605656/)  Slow global economy (http://www.gbm.scotiabank.com/English/bns_econ/forecast.pdf  Ontario business investment - http://www.statcan.gc.ca/daily- quotidien/160510/dq160510a-eng.pdf  Ontario heads to another election in 2018  Issues at hand  Hydro Rates  Economy  Delivery of program spending  Government debt  Taxation/carbon tax
  23. 23. Ontario Debt / Deficit  Ontario’s budget watchdog says that the province’s deficit will be $2.6 billion in 2017-18, despite a Liberal government pledge to balance the books by then.The FinancialAccountabilityOffice released its economic and fiscal outlook today, saying that beyond that fiscal year the deficit will deteriorate further to $3.7 billion in 2020-21.  Ontario’s Liberal government is dipping into its reserve fund to help balance the budget for the next two years, ahead of the next provincial election.  An accounting dispute with the auditor general over how pension assets should appear on the books is adding $2.2 billion to the deficit this fiscal year, but the government insists it will reach balance by its self-imposed deadline of 2017-18.  Ontario universities face several financial pressures, among them pension solvency deficits, according to a new commentary by debt rating service DBRS Ltd. (who is on the hook for the pension shortfall?

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