TORONTO, Sept. 10, 2012 /CNW/ - Brisk activity in Ontario's housing
sector and further recovery in provincial exports will drive economic
growth in 2012, according to the latest RBC Economics Provincial Outlook. RBC forecasts that the provincial economy will grow at a slightly
faster rate of 2.2 per cent this year compared to 1.9 per cent in 2011
- well short of the 3.4 per cent 10-year average preceding the
recession, but slightly stronger that the projected national real GDP
growth of 2.1 per cent.
"While the private sector is showing signs of strengthening, more
restrained public sector spending continues to somewhat inhibit growth,
keeping the overall pace moderate in Ontario," said Craig Wright,
senior vice-president and chief economist, RBC. "Still, at a time when
we expect the pace of national growth to slow this year relative to
last year, the projected slight acceleration of provincial economic
activity is encouraging."
RBC notes that a reduction in government spending on goods and services
and a decline in capital investment for the fifth consecutive quarter
in early 2012, are evidence of reduced public stimulus. This austerity
can also be inferred from a notable drop in public sector employment
from last year. While such actions are necessary to improve the fiscal
position of governments, they will generate substantial headwinds for
the Ontario economy.
Continuing to defy expectations of cooling, the hot housing market has
been a key factor fuelling Ontario's economy this year. Sales of
existing homes in the second quarter were the second best on record for
that period, while housing starts during the first seven months of the
year were the strongest since 2006. Overall, residential investment
should substantially contribute to growth in 2012, though RBC expects
to see some moderation going forward.
A particularly encouraging trend for Ontario's economy has been the
further recovery in manufacturing. Although the recovery in
manufacturing has not been uniform across the sector, there have been
substantial gains achieved in the auto industry, the heart of
manufacturing in Ontario.
"Ontario's auto industry rode the wave of strengthening motor vehicle
sales in the U.S. and Canadian markets with assembly of light vehicles
surging by more than 19 per cent during the first seven months of this
year. In fact, new motor vehicle production is now almost at
pre-recession levels," said Wright. "However, performance was
considerably weaker in the computer and electronic industry, with
shipments dropping to their lowest levels in almost 20 years."
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 7 a.m. ET today at rbc.com/economics/market/pdf/provfcst.pdf.
For further information:
Craig Wright, RBC Economics Research, 416-974-7457
Robert Hogue, RBC Economics Research, 416-974-6192
Elyse Lalonde, Corporate Communications, RBC Capital Markets, 416-842-5635