Ontario's economy sinks deeper into recession, says RBC



    TORONTO, June 15 /CNW/ - Amid difficulties in the manufacturing sector,
weak external demand for products and continued job losses, Ontario's economy
is projected to contract by 3.4 per cent this year, one of the biggest
economic drops in Canada, according to a report by RBC Economics.
    "In Canada, the global recession has hit Ontario especially hard," said
Craig Wright, senior vice-president and chief economist, RBC. "Activity fell
the most in nearly 18 years in the final three months of last year and
evidence so far this year indicates that, far from regaining its footing, the
province's economy likely sank even deeper early in 2009, dragged down by the
collapse of the auto manufacturing sector."
    Housing construction has continued to slide, accelerating last spring's
trend. Combined with the twin pressures of declining consumer demand for
retail goods and automotives, this has led to Ontario's unemployment rate
surging to a 12-year high of 9.4 per cent.
    The report emphasized that the path ahead for the Ontario economy is
fraught with uncertainty, particularly with respect to the fate of major motor
vehicle and parts manufacturing operations in the province. With the auto
industry expected to stabilize by next year, however, RBC forecasts that the
provincial economy will show greater benefits from substantial monetary and
fiscal stimulus in 2010.
    In particular, stimulus spending on infrastructure should significantly
boost construction activity in the province, and even greater stimulus south
of the border should spur U.S. demand for Ontario products and services.
According to RBC, these factors should increase economic growth in the
province next year to a moderate rate of 2.2 per cent - still lower than the
national average of 2.5 per cent.
    The main theme of the RBC Provincial Outlook is that tremendous weakness
late last year and early this year has prompted a downward revision to real
GDP growth forecasts across the board for 2009. Recent developments lend
support to RBC's view that a general recovery will be established by the
second half of 2009 and sustained in 2010. In 2009, expectations are that the
economies of only three provinces - Saskatchewan, Manitoba and Nova Scotia -
will grow, while all other provincial economies will contract. Ontario (deep
troubles in the auto sector) and Newfoundland and Labrador (sharp drop in
mineral and oil production) are taking the biggest hits, with Alberta
(cutbacks in business and residential investment) being the other province
showing above-average decline in activity. However, RBC continues to project
that growth will return to all provinces next year.

    The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales and
housing starts.

    According to the report (available online as of 8 a.m. EDT today, at
    www.rbc.com/economics/market/pdf/provfcst.pdf), provincial forecast
details are as follows:

    
                      Real GDP         Housing starts         Retail sales

                   Y/Y % Change          Thousands            Y/Y % Change
                08     09     10      08     09     10      08     09     10
                --     --     --      --     --     --      --     --     --

    N.& L.    -0.1   -3.5    3.0     3.2    3.2    3.0     7.6    0.1    4.8

    P.E.I      0.9   -1.8    2.0     0.7    0.5    0.7     5.6   -1.3    4.1

    N.S.       2.0    0.2    2.5     4.3    3.2    3.5     4.2   -2.8    4.5

    N.B.       0.0   -0.5    2.7     4.2    3.5    3.5     5.9   -2.2    4.1

    QUE.       1.0   -1.6    2.3    47.9   38.9   37.0     5.1   -1.5    4.5

    ONT.      -0.4   -3.4    2.2    75.6   52.7   65.0     3.5   -3.0    4.2

    MAN.       2.4    0.5    2.8     5.6    3.9    5.3     7.2   -2.6    5.4

    SASK.      4.4    0.7    2.8     6.8    3.3    3.7    10.6   -1.9    5.8

    ALTA.     -0.2   -2.5    2.9    29.0   16.7   28.0    -0.1   -7.8    5.7

    B.C.      -0.3   -1.9    2.9    34.3   14.7   23.0     0.3   -6.5    5.9

    CANADA     0.4   -2.4    2.5     211    141    173     3.4   -3.7    4.8


                    Employment        Unemployment rate

                   Y/Y % Change               %
                08     09     10      08     09     10
                --     --     --      --     --     --

    N.& L.     1.5   -2.6    1.1    13.2   14.7   14.8

    P.E.I      1.3   -2.3    1.0    10.7   12.5   12.6

    N.S.       1.2   -0.4    1.0     7.7    9.3    9.6

    N.B.       0.9   -0.5    0.6     8.6    9.5   10.3

    QUE.       0.8   -1.0    1.1     7.2    8.8    9.4

    ONT.       1.4   -2.6    1.0     6.5    9.3    9.9

    MAN.       1.7   -0.1    1.3     4.1    5.1    5.6

    SASK.      2.2    1.5    1.2     4.1    5.2    5.7

    ALTA.      2.7   -1.0    1.4     3.6    6.4    6.7

    B.C.       2.1   -2.5    2.1     4.6    7.8    7.8

    CANADA     1.5   -1.7    1.3     6.1    8.5    9.0
    





For further information:

For further information: Craig Wright, RBC Economics Research, (416)
974-7457; Robert Hogue, RBC Economics Research, (416) 974-6192; Stephanie Lu,
RBC Media Relations, (416) 974-5506


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