Jason Kirby at MacLean’s Magazine has been putting together
year-end chart extravaganzas for the last few years and his 2017 list of charts to watch has 75 contributions.
They are of course designed to help make sense of the Canadian economy
in the year ahead but they also are useful in understanding regional economic
performance.
There are contributions dealing with trends in population
aging, business investment, government debt, employment, housing markets, wage
growth, export performance, trade, service sector growth, electricity prices,
stock markets, environment, and manufacturing. Indeed, my own contribution to this year’s chart collection was
a simple one showing Canada’s manufacturing to GDP ratio and the exchange rate
since 1950. My point? A low dollar
may not help Canadian manufacturing and by extension what remains of the
manufacturing sector in northern Ontario.
As I note in the write-up: “A high Canadian dollar is often blamed
for Canada’s manufacturing malaise and with its recent depreciation there is
hope that a renaissance will be sparked in Canadian manufacturing. The
long-term evidence suggests otherwise. While Canada’s manufacturing output per
capita has grown in the long term, manufacturing’s share of national output has
fallen quite steadily from 27 per cent in 1950 to 11 per cent today. Our dollar
in terms of its exchange rate with the U.S. dollar (our major trading partner)
was relatively stable from 1950 to the late 1970s, and then began depreciating
from the mid 1970s to the early 2000s. It then appreciated again during
the commodity boom of the 21st century and has been depreciating
recently. Fluctuations in our currency’s value (relative to the U.S. dollar)
may have some short-term effects on manufacturing production. The period
from the late 1970s to the early 1990s does seem to have seen some
stabilization of the share of manufacturing in our GDP. However, Canada’s manufacturing
decline is rooted in long-term economic factors such as productivity
growth—which slowed substantially after 2000—and the trend of developed
economies around the world toward service production.”
In the case of northern Ontario, there has been some
movement in our forest sector recently with a pick-up in sawmill and pulp
sector activity. However, despite
a lower dollar, we should not expect a massive resurgence in this sector. The fact remains that the sector was
hit not only by a higher Canadian dollar during the forest sector crisis but
also the effects of environmental priorities, higher electricity prices, weak
business capital investment in an aging capital stock, and new and more
productive competitors around the world.
As some of the other Maclean's charts show, electricity prices in Ontario are still an issue and business investment in Canada is still weak. Given the permanent shutdown of so much manufacturing capacity in Canada, a lower dollar now is
not going to automatically re-ignite production in manufacturing, let along the forest products sector in northern Ontario. The future of the northern Ontario economy, like the rest of Canada, is going to rely on services.