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October 23, 2012
TORONTO, ON, Oct. 23,2012/ Troy Media/ – The global economic slowdown currently underway is reflected in slower growth in Ontario’s economy and its economic regions.
Regional economic performance in Ontario will vary considerably, but macro-economic forces will dominate most regions. The macro backdrop is seen slowly improving through 2014, lifting most regions’ economic growth from modest to moderate.
The Northwest, London and Hamilton-Niagara regions are forecast to grow faster than other regions and the provincial average through to 2014. Major investment in mining and power projects will have a notable impact on the Northwest’s small economic base. A larger health care and international tourism industry orientation and lower export exposure to the U.S. will boost growth in the London and Hamilton-Niagara regions. While these regions will lead the province, their growth rates will be moderate, since the macro setting dampens growth everywhere.
Underperforming regions through 2014 appear to be Northeast Ontario, Kingston-Pembroke, Stratford-Bruce and Muskoka-Kawarthas. Growth is limited in the Northeast until the U.S. economy grows at a faster pace, while a greater dependence on constrained public spending in Kingston-Pembroke limits its performance. Higher growth in the Stratford-Bruce region awaits construction and operation of large nuclear energy projects. Subdued consumer spending on discretionary items dampens growth in the Muskoka-Kawarthas region.
Regions falling in the middle performance band are Windsor-Sarnia, Toronto, Kitchener-Waterloo- Barrie and Ottawa. Auto, chemical and high-tech manufacturing and exports remain well below pre-recession levels, dampening employment growth in Windsor-Sarnia and Kitchener-Waterloo-Barrie. Lower net in-migration and less housing construction subdues growth in Toronto. Fiscal tightening dampens employment growth in Ottawa.
The big picture
Ontario’s moderate growth performance will continue through 2014 before transitioning to above 3 per cent growth. Weak global economic growth, particularly in Europe but also in the U.S., contributes to below average growth in the short term. The government sector will be a drag on growth through 2014, while consumer spending remains subdued.
The bright spot in an otherwise modest demand environment will be business investment spending. Provincial economic growth will hover around 2 per cent annually through 2014. The expansion in manufacturing and exports will slow, following the strong auto sector rebound.
The expansion in residential investment will slow as declining housing sales this year extend into 2013, causing fewer housing starts. Housing activity will be range-bound for the next two years, despite low mortgage rates. More upside movement to housing sales, prices and starts is foreseen by 2015.
Modest employment growth prevails in 2013 and 2014, leaving the unemployment rate around 7 per cent and labour income growth less than 4 per cent.
Population growth mirrors the labour market and broader economic conditions, with declining immigration and increasing inter-provincial outflow.
Inflation will remain moderate in 2013, though it will bump up from 2012 due to higher food and energy prices. No material rise in underlying inflation will occur until the economy is operating with much less excess capacity.
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