Economic Indicators Review

The Province of Ontario published its Economic Outlook and fiscal review. Here are the highlights:

• For 2011-12 the Ontario government now expects a deficit of $16 billion, $0.3 billion less than budgeted last March.

• Revenues are projected to fall $443 million short of the 2011 budget forecast. Excluding a loan repayment from Chrysler Canada and other first-quarter changes, the shortfall would have been $778 million.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

• The 2011 Budget plan included a $700-million reserve for 2011-12. The reserve has been reduced by $500 million to counter the impact of slower economic
growth on fiscal performance.

• Program spending is consistent with the 2011 budget. Debt service is expected to cost $193 million less than budgeted.

• Deficit projections for the next two fiscal years are unchanged from the March budget. The effect of lower revenues and higher program spending is offset by a decrease in debt service cost.

• Real GDP growth is now projected at 1.8% in both 2011 and 2012, down from 2.4% and 2.7 % in the 2011 budget. The projection for 2013 is 2.5% and for
2014 it is 2.6%.

• The borrowing requirement is projected at $35 billion in 2011-12, $37.2 billion in 2012-13 and $40.0 billion in 2013-14. As of November 15th, 70% of the required 2011-12 borrowing had been completed.

• Debt resulting from accumulated deficits is estimated at 25.2% of GDP at the end of the current fiscal year and is projected to peak at 27.7% in 2014-15.

According to the Institut de la statistique du Québec, in August, real GDP at basic prices contracted 0.6% in the province (Canada +0.3%) after expanding 0.4% in July. Some 60% of the decline was due to a 2.3% drop in manufacturing output. Pulling back on the month were 13 of 20 industry groups accounting for 51% of production. With reports in for two months of Q3, GDP is on track for a quarterly expansion of 0.7% annualized.

United States – The BEA revised Q3 GDP growth down from 2.5% to 2.0% on its second estimate. Most of the adjustment was due to a $14-billion downward revision in inventories, which trimmed 1.55 percentage points off growth. State and local governments once more provided a small measure of drag. By contrast, personal consumption and fixed investments added 1.63% and 1.45%, respectively. Once again, net exports contributed positively to the cause (0.49%).

In October, existing-home sales shot up 1.4% to the rate of 4.97 million units. This came as a surprise as pending home sales, which had fallen over the previous three months, suggested the movement would have been in the opposite direction. Distressed transactions were down from their level a year earlier but still accounted for 28% of sales.

October durable goods orders fell 0.7%, reflecting a significant drop in the aircraft industry. Excluding transportation, orders rose 0.7%. Still, orders sagged in numerous categories as evidenced by the 1.8% decline in new orders for non-defence capital goods excluding aircraft. Moreover the September gain, originally estimated at 2.4%, was revised down to just 0.9%. Despite growing at a slower pace, core goods orders were nonetheless up 4% on an annualized basis.

In October, personal income rose 0.4% while consumption expenditures increased 0.1%. The personal consumption expenditure (PCE) price index slipped 0.1% from the month before. Lower energy prices contributed to the drop, the first in the index since June. Excluding food and energy, the index was up 0.1% on the month and 1.7% on the year.

The Congressional Joint Select Committee on Deficit Reduction failed to reach an agreement on how to cut $1.2 trillion from the federal deficit from 2013 to 2021. However, there is still time left to do so (including a presidential election) before automatic spending cuts kick in across the board as stipulated under the Budget Control Act passed this summer.