February 26, 2014

Two Canadian cities were winners in the federal budget lottery

Federal Finance Minister, Jim Flaherty, presented the Conservative government’s budget on Tuesday, Feb. 11, 2014.

According to the latest estimates, the nation’s finances are fairly upbeat. The deficit in the coming fiscal year, April 1 2014 to March 31 2015, will be minor, only -$2.9 billion.

In fact, it would disappear if a $3.0 billion contingency fund weren’t being held in reserve.

If all goes according to plan, a surplus of $6.4 billion can be expected in 2015-2016.

The Conservatives plan to manage this feat in several tried-and-true ways: an increase in tax revenue from an improving economy; more taxes from smokers as the cost of cigarettes is raised; and a particular “oldie but goodie”, postponement of some defence equipment purchases.

It’s no coincidence that the return to a healthy surplus will occur half a year ahead of when the next election writ will probably be filed, in the fall of 2015.

Accompanying the budget were some spending initiatives directed towards two Canadian cities, Montreal and Windsor. Both will receive large sums for bridge projects.

There will be major spending in Montreal to first repair and then replace the Champlain Bridge which connects the city’s downtown with its south shore suburbs. Other existing bridge makeovers in the region will also be green-lighted.

In Windsor, the priority — at a cost of nearly half a billion dollars — will be a second crossing for passenger vehicle and cargo truck traffic to flow back and forth between the city and Detroit.

Not all of the dollar spending will be new. Commitments to fund these projects were contained in earlier budgets. But at least the latest pronouncements confirm that these public works continue to have high priorities on the Conservatives’ agenda.

Further announcements of support for individual large infrastructure ventures at the city level is probably being held in reserve for maximum impact next year, in advance of Canadians going to the polls.

Money is also being earmarked for a National Disaster Mitigation Program to build structures to ward off damage caused by Mother Nature at her most wilful. This is in response to extensive flood damage across the nation in 2013.

Windsor is a double victor in the latest budget document. Chrysler is looking for assistance from Ottawa and Queen’s Park to justify a billion-dollar overhaul of its van plant in the city. Mr. Flaherty is setting aside $500 million in auto sector innovation money, a portion of which will almost assuredly be used to sweeten the pot for Sergio Marchionne, the Canadian-educated head of Chrysler’s parent company, Fiat Group S.p.A. of Italy.

The two tables below show jobless rates and year-over-year employment gains for Canada’s 33 most populous urban centres. Windsor (+3.5%) is currently ranked ninth in year-over-year job creation and Montreal (+0.5%) appears in 20th position.

As for unemployment rates, Windsor (6.9%) presently stands in spot number 20, with a rate that’s slightly below Canada (7.0%) as a whole, while Montreal (7.9%) is a distant 29.

Statistics Canada recently published another set of statistics — covering only seven cities — which are of particular interest for the construction industry. With a few exceptions, these show that construction costs are remaining under wraps.

The seven-city composite index for apartment construction in the fourth quarter of 2013 was +1.0% versus the fourth quarter of 2012. The largest year-over-year price increases occurred in Vancouver (+3.1%), Calgary (+2.1%) and Edmonton (+1.2%). The gain in Halifax was +0.6%, while Montreal and Toronto were both flat (+0.1%). Only Ottawa (-0.7%) recorded a decline.

In non-residential building construction, the year-over-year change for the seven-city composite was +0.7%. Again, Ottawa (-0.5%) was the sole city to register a drop and Toronto (+0.1%) and Montreal (+0.2%) hardly budged. The percentage increases for the other four cities were: Halifax, +0.8%; Edmonton, +1.1%; Calgary, +1.4%; and Vancouver, +2.9%.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

Ranking of major Canadian cities:

Based on average of latest three months, unadjusted data.

Data source: Statistics Canada / Tables: Reed Construction Data - CanaData.

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