National Housing Day is fast approaching and the National Housing Strategy is just around the corner. With this in mind, staff at the Institute of Fiscal Studies and Democracy (IFSD) thought it would be a good time to do a stocktaking of how governments are doing with the billions of dollars they are already spending on homelessness. The exercise was motivated by one fundamental question: Does the current funding structure for homelessness programs produce the desired results? A summary of the results can be found here, keeping in mind that this analysis exclusively focuses on initiatives to support Canada’s population of homeless people and does not address current and future funding for affordable housing that is not tied to homelessness initiatives.

Following last Friday’s release of Statistics Canada’s October 2017 Labour Force Survey (LFS), the Institute of Fiscal Studies and Democracy (IFSD) has updated its Canada JØLTS analysis for September 2017.

One of the more interesting unknowns in economics today is why economic activity has taken off, particularly in advance economies, but inflation in those countries has remained weak. This blogpost will examine why the strong-growth-weak-inflation dynamic has been observed in Canada, and why this phenomenon is about to come to an end. It concludes that wage growth has lagged advances in the Canadian economy and labour market, and that impending wage growth due to a tight labour market will drive higher core Consumer Price Index (CPI) inflation. But, as the Bank of Canada has telegraphed that it plans to take its time in raising interest rates, it could very quickly find itself behind the curve.

Tomorrow, Minister of Finance Bill Morneau will present the Fall Economic Statement (FES) of the Government of Canada. This document is largely considered an opportunity for the federal government to update Canadians on major policies being implemented and the state of the economy and public finances, as well as to announce new measures. And in the FES, a lot attention is generally directed towards the evolution of the fiscal situation, e.g. the budgetary balance and the fiscal outlook, since the release of the Budget earlier in the year.

Following last Friday’s release of Statistics Canada’s September 2017 Labour Force Survey (LFS), the Institute of Fiscal Studies and Democracy (IFSD) has updated its Canada JØLTS analysis for August 2017.

Back in March, we published a blog post about @NowcastCanada, the Institute of Fiscal Studies and Democracy’s (IFSD’s) nowcast of real GDP growth, as well as the IFSD’s nowcast of the unemployment rate. Our full report on forecasting the unemployment rate using a Google index is now available on our website. See the updated blog post below for more information.

The potential scope and impact of CBAs in future public infrastructure spending remains an open question but will depend importantly on the building of capacity at the community level. A report prepared by Armine Yalnizyan, the well-known economist consulting for the Institute of Fiscal Studies and Democracy (IFSD), draws from experiences in Canada, the U.S., and elsewhere to explore opportunities, best practices, and potential governance supports to help maximize the returns on public infrastructure investments.  

It’s been an amazing run for the Canadian economy over the past six-odd months. Real GDP growth this year is expected to well outpace our neighbour to the south by a wide margin. The labour market is rapidly tightening as well. And given Canada turns 150 years old this year, the bumper economy north of the 49^th parallel is the icing on the cake of this sesquicentennial year. However, the party can’t last forever.

Canada turns 150 years old in a few short weeks, and it looks like the party that’s been going on for a while isn’t going to stop any time soon. Indeed, in the three quarters starting in Q3 2016, real GDP in Canada has experienced average quarterly growth of 3.5% annualized - a solid performance by any measure (Chart 1). To put this in perspective, growth in the US has been a more modest 2.2% over the same period. Mind you, some of the Canadian strength reflects a rebound following the negative economic impact of last summer’s devastating wildfires in Alberta. But recent growth has been more broad-based than we’ve seen in a while. And with @NowcastCanada tracking 2.0% annualized growth in Q2 2017, this above-trend print is helping to put the Canadian economy on track to hit 2.6% real growth in 2017 – the strongest advance since recovering from the Great Recession. Meanwhile, the U.S. economy is on track to advance by 2.2% this year – not bad but nowhere near the pace of its syrup-sipping cousin to the north.

There has been a lot of discussion about the returns private-sector investors are going to require to make investing with the Canada Infrastructure Bank (CIB) a viable option. At a minimum, pension funds must make around a 6% rate of return on their investments, and similar return thresholds apply to infrastructure specifically. However, they should reasonably expect to make much more than that. The reason is that, in addition to being compensated for growth in overall economic activity, investors must be compensated for the risk associated with investing in large, illiquid assets with uncertain returns such as infrastructure. Indeed, asset managers put the annual rate of return from investing in infrastructure in the range of roughly 10% to 15%. This includes returns from both revenues and capital appreciation.

To most readers, the topic of pricing infrastructure assets no doubt precedes to onset of a good night’s sleep. Concepts such as internal rate of return, amortization, economic forecasts, and risk premiums are enough to make even the most interested observer begin to nod off. However, in the context of the planned introduction of the Canada Infrastructure Bank (CIB), it is worth putting these concepts to use, as even a simple application of these ideas is important to evaluating the merits of the CIB.

The federal government seeks to create a new institution for funding infrastructure investment––the Canada Infrastructure Bank (CIB). In Canada, it is governments at all levels that tend to hold the primary role in the planning, building (i.e. as sponsor), managing and financing of infrastructure. Other than in the construction phase, the private sector is a relatively niche player in the lifecycle of infrastructure assets. The CIB aims to be a catalyst for including the private sector in the other aspects of the lifecycle. The untested presumption is that service levels, externalities and competition will remain constant (at least) while risk will be transferred from the public to the private sector. However, this has rarely been the case with public-private partnerships (PPPs)––the oft-cited private-sector solution to public-sector infrastructure folly. Indeed, with the private sector owning and managing infrastructure assets, the cost of capital is likely go up.

In the 2016 Fall Economic Statement, the federal government outlined the broad strokes of its soon to be established CIB. A key recommendation of the Finance Minister’s Advisory Council on Economic Growth and Prosperity, the federal government expounded further on the CIB in Budget 2017 and again, more recently, in the Budget Implementation Act (BIA). The BIA has put even more meat on the bone, although information on this one-of-a-kind crown agency still makes for some pretty thin pickings and public consultations appear to be sparse.  

Over the past 30 years, health care spending in Canada has followed a pattern of peaks and troughs tied to overall economic activity and fluctuations in federal funding. Throughout this period, health spending varied significantly across provinces and territories. This has led to notable differences between actual expenditures and the notional health care costs derived from the macroeconomic fundamentals of population growth, aging, real income growth, and inflation.  

Along with continued advances in computing power and the availability of a broader range of data than just that provided by official sources, nowcasting has become an increasingly popular area of analysis among economists. Also known as tracking or monitoring, nowcasting refers to forecasting an economic variable in the very near term by incorporating data of varying frequencies or timeliness, as well as data from official and unofficial sources.

Budget 2017 is expected in the next few weeks. It will be the second budget for the Liberal government. The stakes are high.Budget 2017 is expected in the next few weeks. It will be the second budget for the Liberal government. The stakes are high.

It is mid-February. The new fiscal year starts April 1. We wait for a signal from our federal Finance Minister on a budget date. The clock ticks.