Ontario hit peak auto sales in 2016; 2017 could be even higher…

Over 820,000 cars and trucks were sold in Ontario last year (2016), almost doubling total motor vehicle sales in 1981. The chart below shows total annual motor vehicle sales since 1981.

Total Auto Sales

In fact, 2017 appears like it could be another record year for motor vehicle sales, with the highest number of cars and trucks sold in the first 5 months of 2017, compared to first 5 months of previous years.

If you break up motor vehicle sales by the two categories offered by Statistics Canada, you notice that sales of passenger vehicles have stagnated since the 1990s, while truck sales have skyrocketed since the 1980s (see figure below). Trucks, as noted in the chart comprise minivans, SUVs, light and heavy trucks, vans and buses.

Passenger and Trucks Sales

Growing motor vehicle sales should not be too surprising to anyone for a number of reasons –

  1. Ontario is after all, in North America
  2. The population of the province has grown considerably over the last decade. Some of the new residents are bound to be drivers
  3. The economy of the province has been performing well over the last decade, which means greater job availability, growing wages and stronger consumer confidence. This all translates into more auto sales
  4. Ontario is home to 5 major auto makers  and over 7 car assembly plants (Fiat-Chrysler in Brampton and Windsor, Ford in Oakville, GM in Oshawa and Ingersoll, Honda in Markham and Alliston, and Toyota in Cambridge and Woodstock)
  5. The logistics and warehousing industry is a big and growing contributor to the Ontario economy (especially with the rise of e-commerce), which generates need for trucks

Why this is so fascinating is because major cities all around the world are at the moment starting to aggressively plan for and facilitate other forms of transportation – namely transit and active transportation (i.e., walking, cycling, rollerblading, etc.). Both the City of Toronto and the Province of Ontario are for example making unprecedented investments in transit, cycling and walking infrastructure. And this is exactly the direction cities should be going into. However, auto sales in Ontario have barely been affected by these initiatives (not to mention the impact autonomous and electric vehicles will have on the existing auto industry and of course, cities). This isn’t necessarily a bad thing – we should absolutely continue to make major (and growing) investments in transit and active transportation, but it is clearly evident that the auto industry is far from dead.

 

Could the next global recession take place in 2018 or 2019?

Economic trends are very difficult to predict accurately – which is why they are sometimes wrong. What we do know however is that since World War 2, recessions have generally occurred every 5-10 years, following general business cycles.

Below is a chart I assembled that shows the unemployment rate in the Province of Ontario for every month since January 1976.

Ontario Unemp

The red line represents Ontario’s unemployment rate, while the grey blocks represent the duration of recessions since the 1970s. What is clear is that there have been 4 recessions, roughly 10 years apart from each other since 1976. During the recessions, we see the unemployment rate rising, with some fairly pronounced spikes in the early 1980s, the early 1990s and the recession of 2008/2009. Interestingly enough, the dot com bubble of the 2000s wasn’t as severe in terms of its impact on the unemployment rate in Ontario.

  • One positive trend I take away from this chart is the consistent and resilient recoveries following each recession
  • One potentially ominous trend I take away from this chart is that it appears like a recession is right around the corner, and could occur in 2018 or 2019

But as the first line of this article states, economic trends are very difficult to predict accurately, and I didn’t undertake any technical analysis to arrive at my assumption/prediction, therefore keep in mind that I could be wrong.

How Ontario Grows

There is a dataset on Statistics Canada that summarizes the components of population growth for the country, and provinces and territories themselves. I decided to collect the data for Ontario to examine what contributed to population growth over the last 30 years.

The three major components of population growth in Ontario are –

  1. Natural Increase
    • Determined by subtracting Deaths from Births
  2. Net International Migrants
    • Determined by subtracting Emigrants from Immigrants + Non-Permanent Residents
  3. Net Interprovincial Migrants
    • Determined by subtracting Out-Migrants from In-Migrants

The three major components of population growth in Ontario since 1971 are shown in figure 1 below.

Figure 1 – Components of Population Growth in Ontario, 1971 – 2016
All COmponents

As with most industrialized countries, the natural increase has been falling for a number of decades as people are marrying later and having fewer children, and due to graying demographics. In contrast are Ontario’s immigration levels (shown as the red line in figure 1 above), which have skyrocketed since the 1980s in response to a declining natural increase, and have accounted for the majority of population growth in Ontario over the last two decades. Finally, the smallest contributor to Ontario’s population growth has been interprovincial migration, which interestingly appeared to have an inverse relationship with immigration levels during the 1970s and 1980s.


The next few charts show the individual components of population growth –

Figure 2 – Annual Births and Deaths in Ontario, 1971 – 2016
Births Deaths

Interesting ebb and flow with annual births in Ontario since the 1970s. If you were to extend the data further back to the 1940s, you would see three “baby booms” –

  • One during the 1950s and early 1960s (known as the baby boom generation);
  • One during the 1980s and early 1990s (known as the millennial generation); and,
  • One we are currently in the midst of (children of the millennial generation?).

Figure 3 – Annual Immigration and Emigration Levels in Ontario, 1971 – 2016
Immigration Emigration

Immigration levels surged during the 1980s likely due to the Immigration Act and the Multiculturalism Act, as well as robust economic conditions in Ontario. The uptick in immigration levels over the last two years is due to the large numbers of non-permanent residents. Non-permanent residents also contributed significantly to the growing immigration levels during the 1980s.

Figure 4 – Annual In- and Out-Migration Levels in Ontario, 1971 – 2016
In and Out Migrants

Another interesting cyclical trend is evident when looking at interprovincial migration in and out of Ontario since the 1970s. The 1980s saw huge interprovincial migration into Ontario mostly from Quebec, Alberta and BC. The 2000s saw exodus of Ontarians into other provinces, namely Alberta. Lately however, there has been an uptick of interprovincial migration into Ontario. For instance, the recent drop in oil prices resulted in a growing number of Albertans moving to Ontario.


And finally, a chart showing the net annual population growth in Ontario –

Figure 5 – Annual Net Population Growth in Ontario, 1971 – 2016
Net Pop