TORONTO, Sept. 17, 2013 /CNW/ - After seeing encouraging signs earlier this year, Ontario's economic
momentum failed to pick up as expected in recent months, according to
the latest RBC Economics Provincial Outlook issued today. With little evidence strengthening activity so far this
year, RBC has revised its forecast for provincial real GDP growth to
1.3 per cent in 2013, down from a previously expected 1.7 per cent.
Still, RBC projects the pace of growth to accelerate in 2014.
"We continue to anticipate exports to be the prime source of economic
growth in Ontario, even though we saw merchandise trade virtually stall
in recent months," said Craig Wright, senior vice-president and chief
economist, RBC. "As the U.S. economy recovers further, demand for
Ontario's exports will rise and contribute real GDP growth of 2.8 per
cent in 2014."
The RBC report notes that among the more positive economic developments
in Ontario during the first half of 2013 were a resilient housing
sector and strong consumer spending on big-ticket items. However, the
lacklustre demand for provincial merchandise exports and manufacturing
production has contributed to a notable drag on growth so far in 2013.
In the June Provincial Outlook, RBC expected auto plants and parts
manufacturers in Ontario to ramp up production as demand and sales for
light vehicles were up dramatically earlier in the year. RBC notes that
motor vehicle production was down 7.9 per cent in the first eight
months of 2013 relative to the same period a year ago, indicating that
Ontario is losing ground to other jurisdictions, including the U.S.
southern states and Mexico.
Furthermore, exports of machinery, primary metals, industrial chemicals
and paper fell year-over-year during the first half of 2013.
Nonetheless, RBC remains confident that stronger U.S. economic activity
will boost demand for Ontario goods and services during the remainder
of this year and into next; this will set the stage for the external
trade sector to contribute positively to growth.
On the bright side, home building continued to be a steady source of
economic activity in Ontario, with residential investment up 3.8 per
cent year-over-year in the first half of 2013. RBC says that continued
job growth was a key factor sustaining housing demand, however, slowing
population growth and rising mortgage rates will weigh on housing
starts this year and next. RBC forecasts housing starts to moderate
from 76,700 units in 2012 to 61,000 units in 2013 and 57,500 units in
2014.
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.
SOURCE RBC
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
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