OTTAWA – The federal government recorded a rare budgetary surplus in June, but cautioned the result does not signal a major turning point in the battle to eliminate the deficit.
The Finance Department’s monthly fiscal monitor showed a surplus of $158 million for the month, after a $2.4-billion deficit in May.
But the department attributed the unusually large gap between the two months to timing factors which counted some of May’s tax receipts in the following month — resulting in an outsized 10.1 per cent gain, or $2.1 billion more than June last year, in revenues during June.
A clearer picture of the government’s fiscal position could be found in the results for the first quarter of the 2013-14 fiscal year, which showed a year-to-date deficit of $2.55 billion, only slightly better than the $2.8-billion shortfall posted at the same point last year.
“The financial results for the April to June 2013 period and recent economic developments suggest that the fiscal projection presented in Economic Action Plan 2013 is on track,” the department said
The government estimated in the March budget the year’s deficit would fall to $18.7 billion from the $25.9-billion shortfall recorded last year.
Despite what had been discouraging results during at the start of the fiscal year, Finance Minister Jim Flaherty insisted last week that he would meet the goal of fiscal balance in the 2015-16 fiscal year, meaning in two years.
“We are going to stay the course; we are going to balance the budget without doubt in 2015,” he pledged.
TD senior economist Sonya Gulati said if the first quarter numbers hold for the year as a whole, the federal deficit would come in at roughly $12 billion, well below the budget estimate.
For the government to significantly better its budget projections, the economy will need to improve markedly during the second half of 2013 and early into 2014.
So far, the economy has produced a mixed picture. Growth in the first half of the year has come at slightly below two per cent, better than the budget expectation of 1.6 per cent pace for 2013. But nominal growth — which includes inflation and is more directly tied to revenues — has been weaker.
Most economists, including the Bank of Canada, are forecasting stronger growth in the latter half of the year as forward momentum gathers in the United States and much of the rest of the world.
June’s fiscal books showed revenues up about 4.3 per cent, or $2.7 billion, during the first three month of the fiscal year, with both personal income tax and corporate tax revenues recording healthy gains.
Meanwhile, expenses were also higher, by $2.6 billion, or 4.5 per cent. Public debt charges dropped by $159 million from the same period last year.