Ontario’s economy will grow more slowly in 2011, according to a new economic forecast released today by Central 1 Credit Union. This is partially due to the effect of the continuing slump in the U.S.
The province’s gross domestic product will rise 2.4% in 2011, compared to 3.7% this year, with a slight uptick in 2012 to 2.5%. Looking at the next three years, Central 1 says the auto manufacturing sector will lead Ontario’s growth as it rebounds from deep recession lows.
“The auto industry will surge ahead more than 30% from the depths it fell to in 2009,” said Helmut Pastrick, Central 1’s chief economist. “Plummeting vehicle sales and plant closings last year marked a low point for the sector but we’re seeing these factors reversed through 2013.”
Government spending will slow but business investment will be helped by the higher value of the Canadian dollar and lower taxes, which have been reduced as a counterbalance to the Harmonized Sales Tax (HST). In addition, Central 1’s forecast expects the Canadian dollar will break through parity with the U.S. dollar and stay above parity at times during 2011.
The housing market and job markets are also expected to undergo a shift in 2011. Ontario house sales will continue to rise early in 2011, with prices hitting record highs next year. On the jobs front, Pastrick expects the unemployment rate to decline from the current 8.6% to 8.3% in 2011, with a continual decline over the next few years. He expects that thousands of new jobs will be created, but the large number of people seeking work will keep the unemployment rate high.
Northern Ontario should experience relatively strong growth as both forestry and mining are expected to rebound from their 2009 lows. Last week Vale Inco announced about $3.4 billion in expenditures are slated for Ontario to upgrade mining and processing facilities at the company’s century-old operations in Sudbury.
Overall, Canada’s economic growth generally mirrors the U.S. through 2013 although at a higher rate of growth. “The most significant difference between Canada’s economy and the U.S. are the stronger consumer and business investment sectors,” said Pastrick.
