TORONTO, March 12, 2015 /CNW/ - Ontario is expected to top provincial
economic growth rankings in 2015, something that has not happened since
2000, according to the latest RBC Economics Provincial Outlook released today.
RBC forecasts real GDP growth for the province to accelerate from an
estimated 2.5 per cent in 2014 to a five-year-best rate of 3.3 per cent
in 2015, before easing modestly in 2016 to 2.7 per cent. These
forecasted rates represent upward revisions from the numbers published
in the December report - 3.1 per cent for 2015 and 2.3 per cent for
RBC notes that economic developments over the past several months have
been overwhelmingly favourable for Ontario's economy.
"The plunge in oil prices, sliding value of the Canadian dollar,
surprise interest rate cut by the Bank of Canada and mounting evidence
of the U.S. economy hitting its stride - these factors should all boost
growth in Ontario," said Craig Wright, senior vice-president and chief
economist, RBC. "The positive effects from the drop in oil prices and
related developments will coalesce at a time when the provincial
economy is already displaying rising momentum."
In 2014, there was clear evidence that activity picked up, particularly
in the trade sector where merchandise exports grew by an 8.0 per cent
in nominal terms. Also encouraging, nearly all major export categories
recorded gains, including consumer goods (up 14.4 per cent) and motor
vehicles and parts (up 8.5 per cent).
Despite a weak start to the year because of poor weather, housing was
another sector that showed surprising strength in 2014. Early signs
suggest that home resale activity started 2015 on strong footing. RBC
says consumer spending is also off to a solid start, with motor vehicle
sales building on an 11.5 per cent surge recorded last year.
Lower oil prices and a sharply weaker dollar will further energize
external trade and the consumer sector in 2015.
"We anticipate that Ontario's exports will continue to make headway into
the U.S. market and lower gasoline prices will put more spendable money
in the pockets of consumers," said Wright. "Low interest rates and a
growing economy will also maintain a positive backdrop for the housing
market, and we expect further increases in home resales and housing
construction this year."
One sector still underperforming last year was non-residential
investment, where capital expenditures by businesses remained quite
stagnant despite an increase in machinery and equipment purchases. The
combination of relatively weak capital spending over the past many
years and closures of productive capacity in the province's
manufacturing sector raised concerns about Ontario's businesses'
ability to capitalize on opportunities, at home and abroad, and,
therefore, Ontario economy's ability to grow. RBC says that, with
exception of the auto sector, there remains sufficient spare capacity
in Ontario's economy to accommodate a spurt in growth of the order of
3.3 per cent in 2015 and 2.7 in 2016.
"Any capacity constraint is unlikely to be a severe issue at this stage
and, if anything, the emergence of capacity related pressures should
encourage firms to invest in the province," added Wright.
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 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
For further information:
Craig Wright, RBC Economics Research, 416-974-7457
Robert Hogue, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635