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Continuing our series on Statistics Canada’s The Daily publication, today we will be focusing on Canadian International Merchandise Trade.

What is it: This publication provides in Canadian dollars, the monthly trade in merchandise to and from Canada on a monthly basis.  Within the definition of “merchandise”, Statistics Canada includes agriculture and fishing, energy, automotive and forestry products, industrial goods and materials, machinery and equipment, and other consumer goods.

Canadian exports and imports are presented separately by month, by principal trading areas, and the above principal commodity groupings.

The data is seasonally adjusted, which is a process that removes the systematic ups and downs that occur throughout the year.

How it is used:

• Viewing trends in these data series can reveal a great deal about specific Canadian industries. For instance, trends in both imports and exports since 2007 show the dramatic impact of the global recession experience in late 2008 and the recovery.
• Sector specific trade information can be valuable for those companies providing goods and services within or to those industries. 
• It is important to keep in mind the impact the Canadian dollar’s value relative to the currencies of our trading partners has on trade in merchandise.  A high Canadian dollar can make Canadian goods less attractive to our international clients.
• Trade balance = exports – imports 
  • a trade deficit = exports < imports
  • a trade surplus = exports > imports

An example:

Your company provides consulting services largely to the auto sector in Ontario.  The sector was hit hard in 2008, and you’ve felt it in your bottom line. You’ve heard positive news reports, but are unsure whether it will translate into business for you. Reviewing the Canadian International Merchandise Trade publication, you can confirm that automotive product exports were up 34.5% year over year in August, and 44.8% year to date August, year over year.  There was a slight dip month over month from July to August 2010, due to trucks and motor vehicle parts.  Overall though, the future looks bright for the industry and your business.  Time to plan how you are going to capture a part of the recovery!

Where can I find more information on this series:

Statistics Canada produces the “Canadian International Merchandise Trade publication (Catalogue number 65-001-X) available at: http://www.statcan.gc.ca/pub/65-001-x/65-001-x2010008-eng.htm.

The most recent Daily publication of this series was on October 14, 2010.
Publication frequency: The catalogue is published on a quarterly basis and contains monthly data.

Cost: Free (pdf or HTML)

Electronic data series available? : Available through Cansim in tables 228-0001-228-0003, 228-0033, 228-0034, 228-0041-228-0043 and 228-0047-228-0057.  Go to http://cansim2.statcan.gc.ca/ and enter the table number.  There will be a charge for the data.

Continuing our series on Statistics Canada’s The Daily publication, today we will be focusing on the New Housing Price Index.

What is it:

The New Housing Price index is one of a group of capital expenditures price indices that Statistics Canada produces.  It measures the change in the price which new houses are initially sold.  Data is available for house and land together and separately.

• Specifications of the homes reported on are consistent across periods, controlling for other factors which could explain a price change.
• GST and HST are not included in the statistic.
• The data is not seasonally adjusted, which means Statistics Canada has not smoothed out any impact that regularly occurring events might have on prices, such as summer holidays, Christmas, etc.
• The statistic is expressed in terms of an index, which means the price is relative to a particular base year, in this case 1997 which receives a “base” value of 100.  All other values are relative to that point in time.

How it is used:

Like the consumer price index, the new housing price index shows the general price level for a given month, in a given location, but specifically focuses on new houses. To interpret it look at the statistic over time.  Is it rising or falling?  What is the percent increase month over month?  Year over year?

An increase in new house prices could indicate a recovery in the sector or a shortage of new housing stock. If you are in a business such as house construction or interior design changes in housing prices are important to consider. After analysing their movement along with the movement in other statistics such as mortgage rates, unemployment rates, GDP, etc, an appropriate response can then be incorporated into the short and long term strategic planning process for your business.

An example:

The new house price index (house and land) for Winnipeg rose from 192.1 to 192.8, a 0.4% increase from July to August 2010.  It also increased by 5.3% year over year in August. Looking further at the year over year trend for August we see that 5.3% is a bit of a rebound from 2009, which experienced slower growth of 1.6%, down from 2008’s value of 6.7%.  2009 was a tough year globally so it is good to see that an improvement is underway in Winnipeg’s housing market.  Confirming this trend through examining other statistics will then provide more certainty as to whether ramping up marketing and production is appropriate for businesses relating to new house construction.

Where can I find more information on this series:

Statistics Canada produces the “Capital Expenditure Price Statistics publication (Catalogue number 62-007-X) available at: http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=62-007-X&lang=eng.

The most recent Daily publication of this series was on October 13, 2010.

Publication frequency: The catalogue is published on a quarterly basis and contains monthly data.

Cost: Free

Electronic data series available: Available through Cansim table 327-0005.  Go to http://cansim2.statcan.gc.ca/ and enter the table number.  There will be a charge for the data.

Summer is over, the leaves are turning, and it’s time to return to regular blogging! 

I thought I’d reach for my inner economist and write a series on one of Statistics Canada’s premier products: The Daily.  In this series, I plan to give a user friendly interpretation of some of the information provided in this publication, and more importantly give insights on how to apply this information to your everyday business life.  After all, your tax dollars pay for it – you might as well get some use out of it!

The Daily can be accessed from the following page on the Statistics Canada website: http://www.statcan.gc.ca/dai-quo/index-eng.htm.  It is published every Monday – Friday, except holidays at 8:30am Eastern time.

Perhaps inspired by the recent healthcare debate south of the border, the economics department at TD has decided to turn its attention to healthcare in Ontario.   Last Thursday, they released a 34 page treatise called “Charting a Path to Sustainable Healthcare in Ontario” which included ten recommendations to “to restrain cost growth without compromising quality of care”.

Unfortunately the fine folks at TD Economics have missed the mark.  Having more than a few years of healthcare experience under my belt, I’d like to comment on some of their assertions.

Firstly, I disagree that this report contains new ideas.  I would also question their assertion that their recommedations could be implemented in a 1-5 year time line.  Anyone who has worked in the Ontario healthcare sector knows that change happens VERY slowly.

I do however whole heartedly agree that the “current governance structure for the province’s hospitals should also be looked at.” I would start with the Local Health Integration Networks (LHINs). 

The report also encourages an expanded private presence in Ontario’s healthcare sector, yet they also recommend that physician compensation be shifted towards salaried remuneration.  Pharmacies are also largely private; yet curbing generic drug costs has been a momentous struggle for the province.  Is more private sector influence the answer?

I’d like to address six of the ten proposals for reform in the report.  (The remaining four are already being addressed by the Ministry.)

1. Expand information technology use in the system.

• The report points to a relative lack of electronic records in physician offices as impacting health system performance.  However, electronic health records created by a physician are the physician’s private property, and not subject to Ministry performance evaluation.  The billing information obtained by OHIP when a physician requests payment is limited to OHIP #, tombstone information, billing code and perhaps a diagnosis.  Electronic health records in hospitals already exist, and are used for analysis by hospitals and the Ministry of Health and Long-term Care (MOHLTC).
• An increase in data collected is only worthwhile if the information created is material, and results in improved quality and/or decreased cost.  Case in point, how many people have hospitals hired to collect wait time data, none of whom contribute to front line care?  Wait time designated surgeries have crowded out other types of surgeries.  Stories of patients driving themselves to their own cataract operations signal that supply outweighs demand.
• Another example is the recent expansion of the Ontario Healthcare Reporting Standards (OHRS) to include the nursing home sector.  Is this increase in the detail of their reporting, which will require hiring more office staff going to yield better frontline healthcare? If the expansion of OHRS in the hospital sector is any indication, I’d say no. 

2. Establish Commission on Quality and Value for Healthcare

• I was really surprised that a bank would make this recommendation! Giving the Ontario bureaucracy permission to study something is like giving them permission to breed.  At about $125k per analyst for salary and benefits, it is yet another expense that doesn’t contribute to front line care.  As the report points out, many arms-length bodies and academic research institutes exist in Ontario who have capable health researchers and policy analysts.  A commission is an unnecessary expenditure of tax dollars.

3. Alter the way doctors are compensated

• As mentioned earlier, the report’s recommendation to move physicians to salary and away from fee-for-service is contrary to its desire to increase the private sector presence in healthcare.  Physicians are private providers after all.  The authors are correct in pointing out that salary based service provision will lead to gaming of the system by physicians as pilot projects have indicated, and will require more data to monitor physician activity. This in turn will require additional bureaucracy and IT systems to create the data, thus reducing any gain to be had from the suggested changes.
• It seems that the report implies that a physician’s chosen care plan may not always be based on the patient’s best interest.   To imply that a physician would provide a service or perform a procedure on a patient that was for reasons other than appropriate patient care is a serious claim. One the Ontario Colleges of Physicians and Surgeons and Family Physicians are in place to determine and address.

4. Change approach of funding hospitals from a global budget system to one based on episode of care

• First.  Diagnosis-Related Groupings (DRGs), the U.S. acute care grouping methodology is not use in Canadian hospitals. Our equivalent is known as Case Mixed Groups (CMGs).  See the following link for a history on this point.
• Second. MOHLTC has recently announced a new hospital funding methodology to be rolled out April 2011.  While not episodic based, the new method is patient based and more sensitive to demographic and other factors faced by each hospital.
• A change to episodic-based funding would require the CMG methodology for acute inpatients, along with a host of other groupers that exist for ambulatory, chronic, rehab, and mental health patients, to be improved upon.  One reason would be that these measures do not currently adjust for the severity of a patient’s condition, and thus the hospital would not be accurately compensated for the episode of care. Also, these grouping methodologies are based on average actual historical performance, not on best practice, quality or efficiency. 
• Even with these improvements, setting up an episode-based payment system would be infinitely more difficult to accomplish than any system in the financial sector.  MOHLTC’s Assistant Deputy Minister Adalsteinn Brown is famous for his illustration of the complexity of MOHLTC data.  It demonstrates just how completely overwhelmed the Ministry is by the data it already has.  
• To further convert to episodic-based funding not only includes costly IT systems (the healthcare system is littered with failed IT projects), but additional labour as well – none of which will contribute directly to frontline care.

5. Establish pre-funding for drug coverage

• This proposal seems to have its incentives confused – It uses CPP as its structure of choice, which we contribute to and see as a good thing to collect on.  If a seniors’ drug plan were structured in a similar manner, would we want to live a longer, sicker life so we could get our money’s worth?

6. Incorporate a healthcare benefit tax into the income-tax structure.

• The report effectively talks itself out of this idea when the inequities and risks to individual health are considered.

While the document is a good primer on some of the issues facing the healthcare sector today, it amounts to what Charlie Munger referred to as “chauffer knowledge”.  I know from past experience as a senior economist that TD Economics is a fine group with a great deal of analytical smarts.  I think their talents could be more productively applied however to issues of a more financial nature – perhaps in tackling the (less complicated!) problems currently facing the Euro zone.

Having worked as a senior economist in two provincial Ministries of Finance, I’ve had the opportunity to work on a number of provincial budgets, as well participate in a Federal budget lockup.

The lockup is an opportunity for provincial governments, banks, journalists, and the like to send their economists and analysts to Ottawa on the Budget day to review the document before it is presented, extracting what meaning they can on behalf of their clients.

A star-studded event

It’s exciting in a way. After all, there are celebrity economists! You know, the ones you see being interviewed on the news doing their best impression of a learned sage, prognosticating about our economic future, or taking credit for predicting the latest up or downturn. Well, they do a particularly good impression at the lockup! Ministry staff are also on hand to answer questions. It is a bit of a sport to try to get them to divulge some tidbit that will give you an angle that no one else will have.

In the midst of all of the excitement, you are reading like a maniac trying to extract from the 400+ page document the points that will matter most to your audience. Your briefing note has to be finished and polished by the time the Minister of Finance rises to give the speech. That’s when the internet access is opened so that the completed notes can be emailed to their intended recipient, so they in turn can draft their official response in time for the end of the budget speech.

The budget process

Flash back now to the weeks and months before budget day. What goes into making of the budget document? I’ve had the opportunity to participate in budget development, both from an economics perspective: where the economy is at,  developing the forecast assumptions for where it is going, the economic context that shapes what tax revenue can be expected and expenditure pressures will be felt; and the fiscal perspective:the revenue and expenditures that is the budget.

Hurry up and wait

The process begins months in advance. Line ministries are hounded for their budget projections. Working on the health file was a particular challenge – its ever increasing budgetary expenditure figures caused me sleepless nights privately wondering how such cost increases could be supported. Seeing those figures has shaped my view on health spending ever since.

These line ministry budgets are fed into analyses and scenarios are run. At the same time detailed forecasts of the economy and its sectors are run and compared to the forecasts published by the banks. This information is fed up the chain to be consumed by the senior bureaucrats and political staff surrounding the minister. This process goes on for what seems like forever. Political jostling ensues, deadlines pass, drop dead dates too.

Once the strategic direction is decided, the panic to draft the document ensues, and the anxious calls to spouses to pick up kids at daycare, late nights and weekends begin for the staff. Sections are written, and rewritten. You proofread till you can’t see straight, checking every word, fact and number. Finally the day comes. The document goes to print.

Hats off!

Even now, when I read a federal or provincial budget I can’t help but give a mental “tip of the hat” to the many people who have put in countless hours to create what is the government’s economic plan, and wish them a well deserved break this weekend. Because come Monday – the process to develop the next Economic Update will begin!