Posted on July - 20 - 2011
Ontario’s economic pulse is beating faster despite the strong Canadian dollar
Mid-way through the first half of 2011, it appears the Ontario economy is shifting to a higher gear driven in large part by the strengthening expansion of the U.S. economy and despite a 5% appreciation of the Canadian dollar versus the U.S. currency over the past year. This stronger growth of external demand is directly responsible for increased exports of industrial materials (+38% year over year), transportation equipment (+22.5%) and machinery and equipment (+6.1%).
Moreover, the fact that full time employment in the province is up by 135,000 over the past six months while the number of part time jobs has fallen by 64,900 suggests that more firms are taking on full time staff in order to meet this increased level of demand.
Indeed, more than half of the jobs added over the past six months have been in export affected industries such as manufacturing (+29,700) and logistics (+19,100), followed by health care and social assistance (+32,900), accommodation and food services (+13,600), professional services (+12,600) and agriculture (+10,800).
Turning to the outlook for construction in the province, the value of industrial building permits issued during the past three months is 78% higher than those issued during the same period a year ago. This increase suggests the strengthening of goods production in the province is giving a healthy boost to non-residential construction, which will help underpin economic growth into 2012.
Turning to the outlook for commercial construction, the sharp pull back in commercial building permits over the past three months (-24% year over year) indicates activity in this construction category will be somewhat subdued over the very near term following a surge in late 2010. However, a solid pattern of growth of office-based employment (over 3% year over year since December 2010), a decline in office vacancy rates in the provinces major metro areas and relatively strong growth of retail sales through the second half of 2010 suggest commercial construction will accelerate late in 2011 or early in 2012.
Finally, despite the winding down of both federal and provincial governments economic stimulus spending, the value of institutional construction spending over the past three months is up by 47% year over year.
For the year as a whole, the combination of sustained growth of both exports and domestic demand, fuelled to a significant extent by the growth of business investment, should cause Ontarios gross domestic product to increase in the range of 3.0% to 3.5% per year over the next two years. This compares to estimated growth of 2.8% in 2010.
Gross domestic product (GDP) growth – Ontario vs. Canada
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