Northern Economist 2.0

Saturday, 8 April 2017

Evaluating Northern Ontario's Growth Plan-Part III: Investment Spending

This is the third in a series of posts in which I am presenting evidence evaluating the Growth Plan for Northern Ontario, which was released on March 4, 2011.  The 25-year plan was to guide provincial decision-making and investment in northern Ontario with the aim of strengthening the regional economy. The goal was strengthening the economy of the North by:
  • Diversifying the region's traditional resource-based industries
  • Stimulating new investment and entrepreneurship
  • Nurturing new and emerging sectors with high growth potential.
While the provincial government did commit itself to the development of performance measures for ministry specific initiatives that supported the implementation of the plan, I will be using a broader set of indicators of overall economic performance that are supported by the availability of readily accessible public data.  My first post was an overview of the series while my second post looked at employment. In this third post, I will be looking at new investment spending as measured by building permits.

New investment activity is captured by building permits. Municipalities issue building permits for new construction and alterations that fall into the categories of residential, industrial, commercial and institutional/governmental construction.  Building permits are of value as a historical data series because they are a key indicator of past levels and trends of economic activity via their documentation of capital formation.  Moreover, they are an indicator of future activity because planned investment in new capital stock lays the foundations for future productive activity.

Figure 1 to 5 provide evidence on the annual value of building permits for total investment activity, as well as the separate categories of residential, industrial, commercial and institutional/governmental.  The data was available monthly from Statistics Canada (Table 260007) for both northeastern and northwestern Ontario and was aggregated into total annual amounts for northern Ontario.


Figure 1 shows the total value of building permits in northern Ontario from 2011 to 2016 and reveals a steady decline from 1099 million dollars to 813 million dollars – a decrease of 26 percent.  Residential permits in Figure 2 parallel this steady overall decline going from 528 million in 2011 to 409 million in 2016 for a decline of 23 percent.  Residential permits drive much of the overall decline as they account for about half of the value of building permits.  Indeed, the number of dwelling units also fall going from 2,200 dwelling unit permits in 2011 to 1352 dwelling unit permits by 2016.



Figures 3 and 4 show that industrial and commercial permits exhibit somewhat more variation in their performance over time.  Industrial permits rise from 2011 to 2012 and then fall steeply before resuming a gradual increase from 2013 to 2015 and then fall again.  Overall, the value of industrial permits falls from 117 million dollars in 2011 to 66 million in 2016 for a percent decline of 44 percent.  Commercial permits peak in 2013 with the overall performance from 2011 to 2016 also being one of decline from 257 to 198 million dollars – a drop of 23 percent.  As for institutional and governmental permit values, in Figure 5 they too show a period of initial increase and then decline with the overall period from 2011 to 2016 showing a drop of 28 percent.

In terms of new investment, the period from 2011 to 2016 appears to be one of overall decline driven largely by the fall in residential investment.  During the period from 2011 to 2013, there does appear to be some increase in industrial, commercial and institutional investment activity but a decline sets in after 2013 making the overall period from 2011 to 2016 in these categories also one of reduced new investment activity as measured by building permits.

More to come in the next post.