Ottawa posted $300M surplus in first nine months of fiscal year

OTTAWA• A preliminary analysis of the federal books says the government ran a budgetary surplus of $ 300 million through the first nine months of the fiscal year.

The surplus is an improvement compared with the April-to-December period in 2017-18, when Ottawa posted a deficit of $8.9 billion.

The Finance Department’s latest fiscal monitor says overall revenues were up $ 19.3 billion, or 8.7 per cent, compared with the same period last year, due in large part to higher revenues from taxes and incoming employment insurance premiums.

The report says program expenses were up $ 8.4 billion, or 3.9 per cent, compared with the same ninemonth stretch last year, because of increases in major transfers to individuals, to other levels of government and due to an increase in direct program spending.

The fiscal monitor also said public debt charges rose $1.7 billion, or 10.3 per cent, mostly due to the higher effective interest rate on government debt and the higher inflation adjustments.

Last November, the Liberals’ fall fiscal update predicted the government was on track to run annual short- falls of $18.1 billion in 201819, $19.6 billion in 2019-20 and $18.1 billion in 2020-21.

Meanwhile, falling gasoline prices pushed down Canadian retail sales for a second straight month in December, ending what was a weak fourth quarter and lacklustre year for the industry.

Retailers posted a 0.1 per cent drop in receipts in December, extending a 0.9 per cent drop in November — the most sluggish back- toback monthly performance last year. For all of 2018, sales were up just 2.7 per cent, the weakest gain since 2015.

The weak performance to end the year underscores a broader trend of slowing consumption by households facing rising borrowing costs, weakening housing markets and volatility in financial markets. It also highlights how the nation’s economy can’t rely as much on consumers to fuel new growth.

T he Bank of Canada, which has raised interest rates five times since mid2017, has said uncertainty over the impact of higher rates on household spending is one reason why it’s cautious in moving borrowing costs higher.

The 2.7 per cent increase in retail sales last year is less than half 2016’s 7.1 per cent gain. During the last three months of 2018, retail sales fell 0.5 per cent from the previous three-month period.

There was some good news in the numbers. Outside of gas stations, retail sales in December were up 0.4 per cent, the biggest increase since May on a 1 per cent jump in car sales. In volume terms, retail sales were up 0.2 per cent.