BMO Economics: Stronger U.S. Growth to Support Ontario
BMO Economics: Stronger U.S. Growth to Support Ontario Economy Later in 2013
- Auto manufacturers investing in Ontario, including Toyota with Woodstock assembly plant
- Housing market continuing to soften
- Real GDP growth of 1.7 per cent expected in 2013 (Canada's expected to be 1.7 per cent)
TORONTO, ONTARIO -- (Marketwire) -- 01/17/13 -- Continued investment in the auto sector represents a bright spot for the Ontario economy, according to the Provincial Monitor report released today by BMO Economics. Real GDP is expected to grow at the national average of 1.7 per cent in 2013, with momentum picking up later in the year once U.S. growth begins to run at a 3 per cent-plus clip.
"While auto production has leveled off in recent months, output in the sector was still up 16 per cent year-over-year in 2012," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Auto producers continue to invest in North America and, despite a strong currency and higher labour costs compared to the southern U.S. and Mexico, Ontario is no exception. Toyota, for example, is expanding production at its Woodstock assembly plant - about 400 jobs. Still, Ontario's manufacturing base is not immune to a strong loonie and relatively high labour costs."
"While interest rates, the loonie and the U.S. economy remain top issues for Ontario businesses, our commercial customers continue to show optimism about their business prospects," said Janet Peddigrew, District Vice President, BMO Bank of Montreal. "The availability of credit and attractive investment opportunities contribute to this optimism, despite the potential challenges."
The housing market continues to cool in the province, and the stricter mortgage rules introduced last July have had a clear negative impact on sales activity. "Existing home sales in Toronto slid nearly 20 per cent year-over-year in December, and price growth has cooled notably," stated Mr. Kavcic. "In the condo segment, for example, average prices were slightly below year-ago levels in December; barring a snapback in demand during this spring's selling season, they could face continued downward pressure as a wave of completions potentially hit the resale market in 2013."
Job growth was a sluggish 0.8 per cent in 2012, though momentum picked u p later in the year alongside gains in the service sector. "The jobless rate ended 2012 at 7.9 per cent, up 0.2 percentage points from the end of 2011, and is expected to fall only modestly in the year ahead before better momentum takes hold in 2014," noted Mr. Kavcic.
The Province of Ontario has lowered its fiscal 2012-2013 deficit projection by $782 million since the budget, to $14.4 billion, thanks to higher revenues generated by better-than-expected economic performance in 2011 and early 2012, and the introduction of a high-income tax bracket. However, the shortfall remains hefty at about 2.2 per cent of GDP, the deepest gap among all provinces. Longer term, the timing for a balanced budget is unchanged at fiscal 2017-2018.
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.
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