Ontario economy to continue to struggle: RBC Economics



    TORONTO, Jan. 11 /CNW/ - According to the latest provincial forecast
released today by RBC, Ontario's economy will continue to struggle with a
beleaguered manufacturing sector and elevated currency issues dragging growth
to 1.4 per cent in 2008.
    "The most serious downsides to Ontario's economy will continue to stick
for some time, yet we do see economic growth improving by a full percentage
point in 2009," said Craig Wright, senior vice-president and chief economist,
RBC. "While a recession is not impossible, we believe that the province can
avoid one despite a growing list of worries."
    Numerous factors weighing down the province's economy include: an
elevated Canadian dollar that is hammering away at manufacturers' export
competitiveness; negative exposure to weak U.S. housing and automotive
markets; strong competition from Asian manufactured goods; weak growth in
machinery and equipment investment despite capital cheapening influences of a
strong currency; and a continued downward trend in new home construction since
the 2003 peak.
    However, the report notes that forecasted currency depreciation, a modest
weakening in commodity prices, and acceleration in U.S. growth later this year
should help boost Ontario's economy in 2008. Auto production should also grow
in late 2008 and into 2009 as U.S. demand stabilizes, a new assembly plant
swings into production, and new models are introduced. A reasonably vibrant
services sector, strength in the tech sector, job growth and healthy consumer
spending will also help bridge the gap.
    "Modest fiscal stimulus announced in the fall 2007 provincial budget is
welcome news, especially regarding taxes," said Wright. "However,
federal-provincial cooperation is still needed to achieve sales tax harmony.
Ontario's lack of tax competitiveness is a major concern as, unlike B.C., it
still applies the provincial sales tax to capital goods."
    Across Canada, Alberta leads all provinces with above-average economic
growth, followed by Saskatchewan and Nova Scotia. On the opposite end of the
scale, and showing a complete turnabout with its mega-projects now in
maturation, Newfoundland and Labrador is posting the slowest economic growth
rate of 0.5 per cent, and on its heels is P.E.I., as well as Quebec and
Ontario with its manufacturing woes. However, a more bullish outlook is in
store by the end of this decade for Newfoundland and Labrador, New Brunswick,
Nova Scotia and, in particular, Saskatchewan, where there is a possibility for
a triple play of diamond mining, rich uranium deposits and a massive oil
strike in the southeastern part of the province.
    The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, personal income
growth, retail sales, housing starts, and the Consumer Price Index.
    According to the report (available online as of 8 a.m. E.S.T., at
www.rbc.com/economics/market/pdf/provfcst.pdf), provincial forecast details
are as follows:

    
                       Real                Housing             Retail
                        GDP                 starts              sales

                                          Thousands
                  07     08     09     07     08     09     07     08     09
                  --     --     --     --     --     --     --     --     --
    NFLD.        9.0    0.5    1.0    2.5    2.2    1.9   10.0    6.0    2.0
    P.E.I.       1.9    1.2    1.4    0.7    0.6    0.5    9.1    4.5    3.7
    N.S.         2.4    3.0    3.5    4.8    4.5    4.1    4.4    4.9    6.5
    N.B.         2.5    2.5    2.6    4.1    3.8    3.4    6.7    4.5    4.0
    QUE.         1.9    1.7    2.5   49.4   46.9   40.4    4.4    4.0    4.1
    ONT.         1.7    1.4    2.6   68.1   66.2   60.2    3.9    3.5    4.7
    MAN.         3.4    3.1    2.5    5.7    5.7    5.0    9.0    5.3    3.4
    SASK.        4.6    3.8    3.3    5.9    6.1    4.5   12.2    8.5    6.5
    ALTA.        4.3    3.9    3.2   48.3   38.6   35.2    9.7    9.0    8.2
    B.C.         3.0    2.5    3.0   38.6   35.2   28.5    7.1    6.0    7.5
    CANADA       2.6    2.1    2.7    228    210    184    5.9    5.1    5.5


                     Employment              CPI

                  07     08     09     07     08     09
                  --     --     --     --     --     --
    NFLD.        0.7    0.1    0.3    1.5    1.0    1.2
    P.E.I.       1.3    0.4    0.2    1.8    1.3    1.6
    N.S.         1.3    1.8    2.0    1.9    1.1    2.0
    N.B.         1.9    1.7    0.9    2.0    1.2    1.6
    QUE.         2.2    1.2    0.9    1.6    1.1    1.6
    ONT.         1.6    1.0    1.1    1.9    1.0    1.7
    MAN.         1.5    1.2    1.5    2.2    1.7    1.6
    SASK.        2.3    1.6    0.8    3.0    2.4    2.4
    ALTA.        4.8    2.0    1.8    5.1    2.9    2.6
    B.C.         3.2    1.9    2.6    1.8    1.4    2.2
    CANADA       2.3    1.3    1.4    2.1    1.4    1.9
    





For further information:

For further information: Craig Wright, RBC Economics, (416) 974-7457;
Derek Holt, RBC Economics, (416) 974-6192; Amy Goldbloom, RBC Economics, (416)
974-0579; Jackie Braden, RBC Media Relations, (416) 974-2124


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