2013 Ontario Budget
Chapter II: Ontario's Economic Outlook and Fiscal Plan

Section C: Ontario's Economic Outlook

Overview

TABLE 2.5 2013 Budget — Numbers at a Glance
Projected Real GDP Growth, 2013 1.5%
Average Projected Private-Sector Growth, 2013 1.6%
Projected Real GDP Growth, 2014 2.3%
Net New Jobs since June 2009 398,100
Net New Jobs since October 2003 607,700
Increase in Real GDP (2012 above 2003)1 13.0%
Increase in Real Household Disposable Income (2012 above 2003)1 25.3%
1 Real GDP and real household disposable income are Ontario Ministry of Finance estimates.
Sources: Statistics Canada, Ontario Ministry of Finance and Ontario Ministry of Finance Survey of Forecasts (April 2013).

Ontario's economy is expected to grow at a moderate pace over the next several years. Business investment is helping Ontario's economy adopt new technologies to produce more innovative goods and services and to expand into new trade markets. As a result, trade is expected to be a key contributor to growth over the medium term. In particular, Ontario will benefit from stronger exports to the United States, as the U.S. economic recovery gains momentum. Over the medium term, consumer spending growth is expected to be in line with the gains in household incomes.

Over the next four years, Ontario is expected to create nearly 400,000 net new jobs, resulting in a steady decline in the unemployment rate to 6.6 per cent by 2016.

While a forecast of sustained moderate growth is a reasonable basis for planning, there are considerable risks in the global economy. Economic and fiscal uncertainty in Europe and the United States continues to pose significant risks for Ontario's economy.

For planning purposes, the Ministry of Finance is assuming real gross domestic product (GDP) growth of 1.5 per cent in 2013, 2.3 per cent in 2014, and 2.4 per cent in both 2015 and 2016.[1]

TABLE 2.6 Ontario Economic Outlook
(Per Cent)
  2010  2011  2012  2013p 2014p 2015p 2016p
Real GDP Growth 3.2 1.8 1.6 1.5 2.3 2.4 2.4
Nominal GDP Growth 5.2 4.7 2.9 3.0 4.1 4.2 4.2
Employment Growth 1.7 1.8 0.8 1.2 1.4 1.5 1.5
CPI Inflation 2.5 3.1 1.4 1.5 2.0 2.0 2.0
p = Ontario Ministry of Finance planning projection.
Sources: Statistics Canada and Ontario Ministry of Finance.

Recent Economic Developments

Ontario real GDP increased by 1.6 per cent in 2012, following an increase of 1.8 per cent in 2011. Solid gains in business investment and international exports as well as continued growth in household spending were the main contributors to economic growth last year.

Chart 2.2 Contributions to Real GDP Growth in 2012. Click for an accessible full description.

Ontario's Economic Performance Since the Recession

Ontario's economy was hard hit by the global recession with real gross domestic product (GDP) declining by 5.2 per cent from the second quarter of 2008 to the second quarter of 2009. Employment dropped by 266,000 net jobs or 4.0 per cent from September 2008 to the recessionary low in June 2009.

Ontario's solid economic fundamentals, combined with strong government action, helped the economy recover from the global recession. Government investment in infrastructure, business investment in plant and equipment, and strong growth in residential construction supported Ontario's recovery, with major economic indicators, including real economic output and employment, rising above pre-recession levels. Ontario's real GDP has increased by 8.0 per cent since the recessionary low in the second quarter of 2009. As of the fourth quarter of 2012, real GDP was 2.4 per cent above its pre-recession peak.

Chart 2.3 Ontario Real GDP Since 2008-09 Recession. Click for an accessible full description.

Since the recessionary low in June 2009, 398,100 net jobs have been created. A strong recovery of 372,300 full-time jobs accounted for the majority of the employment gains since the end of the recession, while part-time employment increased by 25,800 net jobs. The majority of the net new jobs were in the private sector and in industries paying above-average wages. As of March 2013, Ontario had 132,300 more jobs than at the pre-recession peak in September 2008. Ontario's unemployment rate has also declined from a recessionary high of 9.4 per cent in June 2009 to 7.7 per cent in March 2013.

Chart 2.4 Employment Gains Concentrated in Full-Time, Private Sector, Above-Average Wage Jobs. Click for an accessible full description.

The pace of job creation in Ontario since June 2009 is ahead of the Organisation for Economic Co-operation and Development (OECD) average and that of the United States.

Chart 2.5 Ontario Job Recovery Ahead of U.S. and OECD Average. Click for an accessible full description.

In addition, the pace of job creation in Ontario since June 2009 is ahead of all the Great Lakes States and the rest of Canada combined.

Chart 2.6 Ontario Job Recovery Ahead of Key Competitors. Click for an accessible full description.

Global Economic Developments and Outlook

The global economy weakened in 2012 as the European debt crisis worsened. There were numerous credit-rating downgrades of countries and global financial institutions. Weak demand and financial-market volatility resulted in Europe falling back into recession. The weakness in Europe extended globally, causing slower growth in emerging markets. However, actions taken by the European Central Bank have mitigated the severity of the crisis, helping to lower bond yields in affected countries and relieving financial stress.

Many of the factors that restrained global growth last year have begun to dissipate, with the result that world economic growth is expected to improve from 3.2 per cent in 2012 to 3.3 per cent in 2013. However, global uncertainty and renewed concerns about Europe containing the debt crisis remain key risks to global growth.

Chart 2.7 Global Economic Growth Outlook Weakened in 2012. Click for an accessible full description.

Although the situation varies greatly from country to country, real GDP in the European Union fell by 0.3 per cent in 2012 and is expected to decline by a further 0.1 per cent in 2013. Growth is expected to remain relatively subdued, increasing by just 1.2 per cent in 2014.

Chart 2.8 European Union Economy Expected to Resume Growth in 2014. Click for an accessible full description.

The direct impact of the recession in Europe on Ontario has been limited. Ontario's exports to the European Union account for just over 12 per cent of total international merchandise exports and rose 2.5 per cent in 2012.

U.S. Economy

The U.S. economy continues to recover at a steady, albeit modest, pace. Economic growth in the final quarter of 2012 was essentially unchanged, but this largely reflected a number of temporary factors, including Hurricane Sandy. Going forward, U.S. growth is expected to improve as many of the "headwinds" that have held back the U.S. economy begin to abate.

The U.S. housing market is recovering, supported by low borrowing costs, steady employment gains and improving consumer confidence. Housing starts, while still at historically low levels, climbed nearly 30 per cent to 0.8 million in 2012 and are expected to rise to 1.0 million in 2013 and 1.2 million in 2014. House prices are recovering and are now 7.3 per cent above the lows reached in 2011. Household net worth has almost fully recovered from the recession, which will help support consumer spending and residential investment. Motor vehicle sales reached a five-year high of 14.4 million units in 2012 and are forecast to reach over 16 million units by 2016. Expansion in the U.S. manufacturing sector, with rising employment and output, has provided further support to the broad-based recovery.

Despite the encouraging signs of economic recovery, U.S. fiscal uncertainty remains a significant downside risk. Tax increases implemented at the beginning of this year, alongside spending cuts currently underway, will partly offset private-sector demand growth that is fuelling the U.S. recovery. Beyond the near term, it is crucial for the global economy that the U.S. government establish a credible plan to limit the growth in federal debt.

Chart 2.9 U.S. Household Net Worth Continues to Recover. Click for an accessible full description.

U.S. real GDP is expected to grow by 2.1 per cent this year and average 2.9 per cent over the 2014–16 period. Employment is projected to improve modestly, with the unemployment rate declining to 6.3 per cent by 2016.

Chart 2.10 Strengthening U.S. Recovery. Click for an accessible full description.

Although the share of Ontario exports to the United States has trended lower in recent years, the United States remains by far Ontario's largest trading partner. It was the destination for over 78 per cent of the province's international merchandise exports in 2012. Ontario exports of motor vehicles and parts to the United States totalled $54.5 billion in 2012, up 17 per cent from 2011.

Oil Prices

The price of West Texas Intermediate (WTI) crude oil averaged $94 US per barrel in 2012, just below $95 US per barrel in 2011. Oil production in the United States and Canada has continued to increase, adding to transportation bottlenecks and rising inventories. As a result, the WTI benchmark continues to trade below other global benchmarks.

Oil and oil products are a major import for Ontario. In 2012, domestic and foreign imports of oil and oil products cost Ontario $21 billion. Domestic sources supplied about 92 per cent of Ontario's crude oil requirements in 2012, with the majority coming from Western Canada.

Over the next few years, North American production is expected to contribute significantly to global oil supply growth. Increasing U.S. pipeline capacity will reduce bottlenecks in the Midwest and increase supply to the Gulf Coast —the location of the majority of U.S. refining capacity. This should help to narrow WTI's discount to other crude oil benchmarks.

Despite increases in North American supply, strengthening global economic growth will raise oil demand and support price increases. The Ministry of Finance forecasts that the price of WTI crude oil will average $94 US per barrel in 2013. Current private-sector forecasts for the price of WTI crude oil in 2013 range from $88 US to $99 US per barrel. The Ministry of Finance is currently assuming that the price of WTI will average $98 US per barrel in 2014, $99 US in 2015 and $100 US in 2016.

Chart 2.11 Oil Prices to Remain High. Click for an accessible full description.

The Canadian Dollar

The Canadian dollar fluctuated around parity with the U.S. dollar in 2012, declining to a low of 97.3 cents in June and rising to a high of 102.2 cents in September. Since September, the Canadian dollar has fallen below parity, dropping about four per cent. Private-sector forecasts for the Canada-U.S. dollar exchange rate in 2016 range from an appreciation to 106 cents US to a depreciation to 91 cents US.

Chart 2.12 Canadian Dollar to Remain Close to Parity. Click for an accessible full description.

Financial Markets

Interest rates remain low as central banks around the world maintain accommodative policies to support economic recovery. In addition, Canada's strong fiscal position relative to other countries has increased investor demand for Canadian bonds, keeping yields at historically low levels. The yield on 10-year Government of Canada bonds fell to a record low of 1.58 per cent in mid-July 2012.

Since September 2010, the Bank of Canada has maintained its target for the overnight rate at one per cent. The Bank of Canada is expected to keep its policy interest rate near historic lows until at least late 2014. Private-sector economists expect the interest rate on three-month treasury bills to average 1.0 per cent this year, rise to 1.2 per cent in 2014 and reach 3.1 per cent by 2016. The average forecast for the yield on 10-year Government of Canada bonds is a gradual rise from 2.0 per cent in 2013 to 3.9 per cent in 2016.

Chart 2.13 Interest Rates to Rise Gradually. Click for an accessible full description.

Forecasts for key external factors are summarized in the table below. These are used as the basis for the Ministry of Finance's forecast for Ontario's economic growth.

TABLE 2.7 Outlook for External Factors
   2010 2011 2012 2013p 2014p 2015p 2016p
World Real GDP Growth
(Per Cent)
5.2 4.0 3.2e 3.3 4.0 4.4 4.5
U.S. Real GDP Growth
(Per Cent)
2.4 1.8 2.2 2.1 2.7 3.1 2.9
West Texas Intermediate
Crude Oil ($US/bbl.)
79 95 94 94 98 99 100
Canadian Dollar (Cents US) 97.1 101.1 100.1 98.0 99.5 100.0 99.5
Three-Month Treasury Bill Rate1
(Per Cent)
0.6 0.9 0.9 1.0 1.2 1.9 3.1
10-Year Government Bond Rate1
(Per Cent)
3.2 2.8 1.9 2.0 2.6 3.2 3.9
e = estimate. p = Ontario Ministry of Finance planning projection based on external sources.
1 Government of Canada interest rates.
Sources: IMF World Economic Outlook (April 2013), U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March and April 2013), CME Group, Bank of Canada, Ontario Ministry of Finance Survey of Forecasts (April 2013) and Ontario Ministry of Finance.

Table 2.8 provides the current estimate of the impact of changes in key external factors on the growth of Ontario's real GDP, assuming that other external factors remain unchanged. The relatively wide range for the impacts reflects uncertainty in estimates of how the economy would respond to changing external conditions.

TABLE 2.8 Impacts of Sustained Changes in Key External Factors on Ontario's Real GDP Growth
(Percentage Point Change)
  First Year Second Year
Canadian Dollar Depreciates by
Five Cents US
+0.1 to +0.8 +0.2 to +0.9
Crude Oil Prices Increase by
$10 US per Barrel
–0.1 to –0.3 –0.1 to –0.3
U.S. Real GDP Growth Increases by
One Percentage Point
+0.3 to +0.7 +0.4 to +0.8
Canadian Interest Rates Increase by
One Percentage Point
–0.1 to –0.5 –0.2 to –0.6
Source: Ontario Ministry of Finance.

Outlook for Ontario Economic Growth

The Ministry of Finance is projecting continued growth in Ontario's economy. Real GDP is projected to grow by 1.5 per cent in 2013, 2.3 per cent in 2014, and 2.4 per cent in both 2015 and 2016. Growth is expected to be supported by gains in exports and business investment. Household spending will grow in line with income, which will be supported by employment and wage gains. Government spending on goods and services is not expected to contribute to growth over the next several years as all levels of government restrain spending.

Chart 2.14 Forecast for Sustained and Better Balanced Growth. Click for an accessible full description.

Job creation is expected to strengthen over the medium term, with employment increasing by 1.2 per cent in 2013, 1.4 per cent in 2014, and 1.5 per cent in both 2015 and 2016. By 2016, Ontario will have created nearly 400,000 net new jobs compared to 2012. The solid gains in employment will allow the unemployment rate to decline steadily from 7.7 per cent in 2013 to 6.6 per cent by 2016.

Chart 2.15 Employment Expected to Rise Over the Medium Term. Click for an accessible full description.

Chart 2.16 Unemployment Rate Forecast to Steadily Decline. Click for an accessible full description.

Ontario Consumer Price Index (CPI) inflation fell to 1.4 per cent in 2012 from 3.1 per cent in 2011. The softer pace of inflation in 2012 was largely due to more muted increases in the price of gasoline. Consumer price inflation is forecast to be 1.5 per cent in 2013 and then rise to 2.0 per cent in 2014, the mid-point of the Bank of Canada's target range for Canadian CPI inflation.

Real household spending growth is expected to remain steady this year at 1.6 per cent, in line with real income, as elevated household debt loads restrain credit demand. Over the 2014–16 period, real household spending growth is expected to average 2.3 per cent per year.

The Ontario housing market has been strong since the recent recession, supported by solid underlying demand and record-low mortgage rates. The average resale home price in Ontario has increased more than 43 per cent from the recessionary low in October 2008. However, recent changes to mortgage rules — reducing the amortization period and increasing the minimum down payment — appear to have successfully provided an offset to the stimulative effect of record-low mortgage rates. Recent housing indicators have pointed to a cooling in the market, supporting expectations for a "soft landing" correction. As a result, house prices, home resales and housing starts are expected to ease only moderately over the next two years. Although interest rates are expected to rise over the medium term, mortgage carrying costs are expected to remain affordable.

Chart 2.17 Housing in Ontario to Remain Affordable. Click for an accessible full description.

Canada's household debt-to-income ratio was 165.0 per cent in the fourth quarter of 2012. When adjusted to the U.S. methodology, it was 153.9 per cent, above the comparable U.S. ratio of 138.7  per cent. Although the rate of increase has moderated, the level of household debt in Canada remains elevated and continues to represent a risk for the outlook.

Chart 2.18 Canadian Household Debt Continues to Rise. Click for an accessible full description.

The rise in household indebtedness over the past decade has been offset by the decline in consumer interest rates, which has kept debt servicing costs affordable. Going forward, interest rates are expected to rise only gradually.

Chart 2.19 Canadian Debt Servicing Costs Remain Affordable. Click for an accessible full description.

Importantly, the rise in household debt has been matched by an even larger increase in household assets. As a result, the net worth of Canadian households has increased, reaching a high of $7.0 trillion in the fourth quarter of 2012.

Chart 2.20 Canadian Household Net Worth Rising. Click for an accessible full description.

Business investment has been one of the leading contributors to Ontario's economic growth since the recent recession. The growth in investment has been supported by both a recovery of corporate profits and a more competitive tax system resulting from Ontario's Tax Plan for Jobs and Growth— including the Harmonized Sales Tax. Productivity-enhancing machinery and equipment investment has jumped 39.4 per cent since its trough in the fourth quarter of 2009.

Growth in machinery and equipment investment is forecast to remain buoyant, increasing by 3.8 per cent in 2013 and by an average annual rate of 5.8 per cent over the 2014–16 period. Investment in non-residential construction is expected to increase by an average of 3.3 per cent annually over the 2013–16 period.

Chart 2.21 Sustained Growth in Business Machinery and Equipment Spending. Click for an accessible full description.

Continuing growth in U.S. consumption and business investment, including steady gains in motor vehicle sales, will support Ontario exports. Real exports are projected to increase by an average of 2.9 per cent annually between 2013 and 2016, outpacing a 2.1 per cent increase in imports. This will lead to an improvement in Ontario's net trade position and contribute to overall economic growth.

Chart 2.22 Exports Expected to Increase. Click for an accessible full description.

Details of the Ontario Economic Outlook

The following table provides details of the Ministry of Finance's economic outlook for 2013 to 2016.

TABLE 2.9 The Ontario Economy, 2011 to 2016
(Per Cent Change)
  Actual Projection
  2011 2012 2013 2014 2015 2016
Real Gross Domestic Product 1.8 1.6 1.5 2.3 2.4 2.4
Household Consumption 2.1 1.4 1.6 2.2 2.3 2.4
Residential Construction 3.8 6.5 (2.6) (1.7) 1.0 2.4
Non-residential Construction 5.3 1.4 3.0 3.2 3.2 3.6
Machinery and Equipment 19.7 3.3 3.8 6.2 5.7 5.5
Exports 5.7 5.1 1.7 3.8 3.4 2.9
Imports 7.5 3.8 1.7 2.3 2.2 2.2
Nominal Gross Domestic Product 4.7 2.9 3.0 4.1 4.2 4.2
Other Economic Indicators            
Retail Sales 3.6 1.5 2.5 3.8 3.8 3.8
Housing Starts (000s) 67.8 76.7 61.0 60.0 65.0 68.0
Home Resales 2.7 (2.1) (4.5) (2.0) 0.5 2.0
Primary Household Income1 3.3 2.7 2.8 3.9 4.2 4.5
Compensation of Employees1 3.4 2.8 2.8 3.7 4.3 4.3
Net Operating Surplus — Corporations1 18.6 1.2 3.3 5.0 4.0 4.0
Consumer Price Index 3.1 1.4 1.5 2.0 2.0 2.0
Employment 1.8 0.8 1.2 1.4 1.5 1.5
Job Creation (000s) 121 52 83 98 107 107
Unemployment Rate (Per Cent) 7.8 7.8 7.7 7.4 7.0 6.6
Key External Variables            
U.S. Real Gross Domestic Product 1.8 2.2 2.1 2.7 3.1 2.9
WTI Crude Oil ($ US per Barrel) 95 94 94 98 99 100
Canadian Dollar (Cents US) 101.1 100.1 98.0 99.5 100.0 99.5
3-month Treasury Bill Rate2 0.9 0.9 1.0 1.2 1.9 3.1
10-year Government Bond Rate2 2.8 1.9 2.0 2.6 3.2 3.9
1 See Glossary for further details.
2 Government of Canada interest rates (per cent).
Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Bank of Canada, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March and April 2013), CME Group and Ontario Ministry of Finance.

Private-Sector Forecasts

The Ministry of Finance consults with private-sector economists and tracks their forecasts in order to inform the government's planning assumptions. All of these private-sector economists are forecasting continued growth for the Ontario economy in 2013 and the following three years. On average, private-sector forecasters are projecting growth of 1.6 per cent in 2013, 2.4 per cent in 2014, and 2.5 per cent in both 2015 and 2016.

In the process of preparing the 2013 Budget, the Minister of Finance met with private-sector economists to hear their views on the economic outlook and Ontario's prospects. Additionally, the Ontario Economic Forecast Council, established by the Fiscal Transparency and Accountability Act, 2004, reviewed the Ministry of Finance's economic assumptions. All council members found the assumptions to be reasonable.

TABLE 2.10 Private-Sector Forecasts for Ontario Real GDP Growth
(Per Cent)
  2013 2014 2015 2016
BMO Capital Markets (April) 1.5 2.3
Central 1 Credit Union (March) 1.7 2.2 2.5 2.7
Centre for Spatial Economics (March) 1.7 1.7 2.1 2.0
CIBC World Markets (April) 1.6 2.5 2.3 2.1
Conference Board of Canada (February) 1.9 2.7 2.4 2.3
Desjardins Group (March) 1.6 2.5
IHS Global Insight (February) 1.7 2.6 2.7 2.6
Laurentian Bank Securities (March) 1.5 2.3
National Bank (March) 1.2 2.4
RBC Financial Group (March) 1.6 2.8
Scotiabank Group (March) 1.5 2.1
TD Bank Financial Group (April) 1.4 2.5
University of Toronto (March) 1.3 2.7 2.9 3.0
Private-Sector Survey Average 1.6 2.4 2.5 2.5
Ontario's Planning Assumption 1.5 2.3 2.4 2.4
Sources: Ontario Ministry of Finance Survey of Forecasts (April 2013) and Ontario Ministry of Finance.

Change in the Economic Outlook

Over the last year, there has been a downward shift in economic growth expectations. The outlook for growth in 2013 and 2014 has softened, reflecting a somewhat weaker U.S. outlook and the European recession. The average private-sector forecast for real growth is currently 1.6 per cent for 2013, down over half a percentage point from the projection at the time of the 2012 Budget. Forecasts for 2014 and 2015 have also edged down from a year ago.

Chart 2.23 Weakening Private-Sector Outlook for Growth. Click for an accessible full description.

Comparison to the 2012 Budget

Forecasts for growth are lower than projected at the time of the 2012 Budget. The slower projected growth for Ontario reflects weaker U.S. and European economic growth.

TABLE 2.11 Changes in Key Economic Forecast Assumptions
2012 Budget to 2013 Budget
(Per Cent Change)
  2012 2013p 2014p
  2012
Budget
Actual 2012
Budget
2013
Budget
2012
Budget
2013
Budget
Real Gross Domestic Product 1.7 1.6 2.2 1.5 2.4 2.3
Nominal Gross Domestic Product 3.4 2.9 4.1 3.0 4.2 4.1
Retail Sales 3.0 1.5 3.7 2.5 3.9 3.8
Housing Starts (000s) 64.0 76.7 63.0 61.0 69.0 60.0
Primary Household Income1 2.9 2.7 3.7 2.8 4.2 3.9
Compensation of Employees1 3.2 2.8 4.2 2.8 4.3 3.7
Net Operating Surplus — Corporations1 4.0 1.2 4.6 3.3 4.9 5.0
Employment 0.9 0.8 1.3 1.2 1.5 1.4
Job Creation (000s) 59 52 89 83 103 98
Key External Variables            
WTI Crude Oil ($ US per Barrel) 100 94 104 94 106 98
U.S. Real Gross Domestic Product 2.3 2.2 2.6 2.1 3.0 2.7
Canadian Dollar (Cents US) 98.0 100.1 101.0 98.0 102.5 99.5
3-month Treasury Bill Rate2
(Per Cent)
0.9 0.9 1.4 1.0 2.4 1.2
10-year Government Bond Rate2
(Per Cent)
2.2 1.9 2.8 2.0 3.8 2.6
p = Ontario Ministry of Finance planning projection.
1 See Glossary for further details.
2 Government of Canada interest rates.
Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Bank of Canada, CME Group, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March 2012 and April 2013) and Ontario Ministry of Finance.

Endnotes:

[1] Based on information available to April 16, 2013.

Chart Descriptions

Chart 2.2: Contributions to Real GDP Growth in 2012

Bar chart shows the contribution to real GDP growth in 2012. In 2012, Ontario’s GDP grew by 1.6 per cent. Household spending contributed 0.6 percentage point to GDP growth. Government subtracted 0.3 percentage point from GDP growth. Residential investment contributed 0.4 percentage point to GDP growth. Plant and equipment investment contributed 0.3 percentage points to GDP growth. Exports contributed 2.5 percentage points to GDP growth. Imports subtracted 1.9 percentage points from GDP growth.

Return to Chart 2.2

Chart 2.3: Ontario Real GDP Since 2008–09 Recession

Line chart shows the level of Ontario real GDP between the first quarter of 2008 and the fourth quarter of 2012. Ontario real GDP reached its pre-recession peak of $601.8 billion in the second quarter of 2008 and declined to its recessionary trough of $570.8 billion in the second quarter of 2009. As of the fourth quarter of 2012, real GDP has risen to $616.2 billion.

Return to Chart 2.3

Chart 2.4: Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs

Bar chart shows Ontario employment gains since June 2009. Total employment increased by 398,000 since June 2009. Full-time employment increased by 372,000, while part-time employment increased by 26,000. Private-sector employment increased by 219,000, while public-sector employment increased by 122,000, and self-employment rose by 57,000. Employment in above-average wage industries increased by 259,000, while employment in below-average industries increased by 139,000.

Return to Chart 2.4

Chart 2.5: Ontario Job Recovery Ahead of U.S. and OECD Average

Line chart compares the percentage change in employment relative to its pre-recession peak in Ontario, the average for the member countries of the Organisation for Economic Co-operation and Development (OECD) and the United States between the first quarter of 2008 and the first quarter of 2013.

As of the first quarter of 2013, employment in Ontario has recovered to well above its pre-recession peak while the United States is below its pre-recession peak. As of the fourth quarter of 2012, the OECD is slightly higher than its pre-recession peak.

Return to Chart 2.5

Chart 2.6: Ontario Job Recovery Ahead of Key Competitors

Bar chart shows the per cent change in Ontario’s employment since June 2009 compared to Great Lake States, the OECD average, the U.S. average and the rest of Canada.

Ontario’s employment has increased by 6.2 per cent since June 2009.

New York was down 0.3 per cent, Wisconsin was down 0.2 per cent, Ohio was up 0.3 per cent, Indiana was up 1.0 per cent, Illinois was up 1.2 per cent, Michigan was up 1.3 per cent, Pennsylvania was up 1.9 per cent, Minnesota was up 4.2 per cent, the OECD average was up 2.9 per cent, the U.S. average was up 3.5 per cent and the rest of Canada was up 4.7 per cent.

Return to Chart 2.6

Chart 2.7: Global Economic Growth Outlook Weakened in 2012

Bar chart shows real GDP growth for advanced economies from 2010 to 2014 and real GDP growth for emerging and developing economies over the same period.

Real GDP growth for advanced economies was 3.0 per cent in 2010, 1.6 per cent in 2011 and estimated to be 1.2 per cent in 2012. According to the International Monetary Fund (IMF), growth is projected to be 1.2 per cent in 2013 and 2.2 per cent in 2014.

Real GDP growth for emerging and developing economies was 7.6 per cent in 2010, 6.4 per cent in 2011 and estimated to be 5.1 per cent in 2012. According to the IMF, growth is projected to be 5.3 per cent in 2013 and 5.7 per cent in 2014.

Return to Chart 2.7

Chart 2.8: European Union Economy Expected to Resume Growth in 2014

Bar chart shows European Union real GDP growth from 2011 to 2014. The European Union economy grew by 1.6 per cent in 2011 and declined by 0.3 per cent in 2012. According to Consensus Economics, real GDP is projected to decline by 0.1 per cent in 2013 and increase by 1.2 per cent in 2014.

Return to Chart 2.8

Chart 2.9: U.S. Household Net Worth Continues to Recover

Line chart shows the level of U.S. household net worth. The level of U.S. household net worth declined from a peak of $67.4 trillion in the third quarter of 2007 to a low of $51.4 trillion in the first quarter of 2009. It has risen to $66.1 trillion in the fourth quarter of 2012, just below the high reached in the third quarter of 2007.

Return to Chart 2.9

Chart 2.10: Strengthening U.S. Recovery

Bar chart shows U.S. real GDP growth from 2009 to 2016. U.S. real GDP declined 3.1 per cent in 2009 and grew by 2.4 per cent in 2010, 1.8 per cent in 2011 and 2.2 per cent in 2012. According to Blue Chip Economic Indicators, U.S. real GDP is projected to grow by 2.1 per cent in 2013, 2.7 per cent in 2014, 3.1 per cent in 2015 and 2.9 per cent in 2016.

Return to Chart 2.10

Chart 2.11: Oil Prices to Remain High

Line chart shows the price of WTI crude oil from 2000 to 2016. The price of West Texas Intermediate (WTI) crude oil rose from $30 US per barrel in 2000 to $94 US per barrel in 2012. The Ontario Ministry of Finance projects oil prices to rise to $100 US per barrel by 2016.

Return to Chart 2.11

Chart 2.12: Canadian Dollar to Remain Close to Parity

Line chart showing the Canadian exchange rate from 1990 to 2016 and the low and high private-sector projections for 2013 to 2016. The Canadian dollar fell from 87 cents US in 1991 to a low of 64 cents US in 2002. It rose to 100 cents US in 2012. The Ministry of Finance projects the Canadian dollar will remain close to parity through 2016, with private-sector projections ranging from a high of 106 cents US to a low of 91 cents US.

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Chart 2.13: Interest Rates to Rise Gradually

Line chart showing the 10-year Government of Canada bond yield and the 3-month Government of Canada treasury bill rate from 1990 to 2016. The 10-year Government of Canada bond yield has declined from over 10 per cent in 1990 to a low of 1.9 per cent in 2012. It is expected to rise gradually to 3.9 per cent in 2016. The 3-month treasury bill rate has declined from close to 13 per cent in 1990 to 0.9 per cent in 2012. It is expected to rise gradually to 3.1 per cent in 2016.

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Chart 2.14: Forecast for Sustained and Better Balanced Growth

Bar chart shows the contribution to real GDP growth over the 2008 to 2012 period and the forecast contribution to real GDP growth over the 2013 to 2016 period.

Ontario’s average annual real GDP growth was 0.6 per cent for the 2008 to 2012 period and is projected to be 2.2 per cent for the 2013 to 2016 period.

Household spending contributed 1.0 percentage point to growth over the 2008 to 2012 period and is expected to contribute 1.3 percentage points over the 2013 to 2016 period.

Government contributed 0.7 percentage point to growth over the 2008 to 2012 period and is expected to subtract 0.1 percentage point from growth over the 2013 to 2016 period.

Residential investment contributed 0.1 percentage point to growth over the 2008 to 2012 period and is expected to make no contribution to growth over the 2013 to 2016 period.

Plant and equipment investment subtracted 0.1 percentage point from growth over the 2008 to 2012 period and is expected to contribute 0.5 percentage point to growth over the 2013 to 2016 period.

Net trade subtracted 1.2 percentage points from growth over the 2008 to 2012 period and is expected to contribute 0.5 percentage points from growth over the 2013 to 2016 period.

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Chart 2.15: Employment Expected to Rise Over the Medium Term

Bar chart shows the annual level of Ontario employment from 2009 to 2016. Ontario employment rose from 6.5 million in 2009 to 6.8 million in 2012. The Ontario Ministry of Finance projects employment to increase to 6.9 million in 2013, 7.0 million in 2014, 7.1 million in 2015 and 7.2 million in 2016.

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Chart 2.16: Unemployment Rate Forecast to Steadily Decline

Bar chart shows Ontario’s annual unemployment rate from 2009 to 2016. The unemployment rate was 9.0 per cent in 2009, 8.7 per cent in 2010, and 7.8 per cent in both 2011 and 2012. The Ontario Ministry of Finance projects the unemployment rate to be 7.7 per cent in 2013, 7.4 per cent in 2014, 7.0 per cent in 2015 and 6.6 per cent in 2016.

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Chart 2.17: Housing in Ontario to Remain Affordable

Line chart shows the mortgage carrying cost as a share of disposable income per household in Ontario from 1981 to 2016. The line increased to a high of over 36 per cent in 1990 and then declined to a low of 20 per cent in 1998; it has since trended higher, reaching 26 per cent in 2012. The Ontario Ministry of Finance projects the share to remain close to 26 per cent over the 2013 to 2016 period.

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Chart 2.18: Canadian Household Debt Continues to Rise

Line chart shows household debt as a percentage of household disposable income in Canada and the U.S. from the first quarter of 2000 to the fourth quarter of 2012. The line for Canada increased steadily from 100 per cent in the first quarter of 2000 to 154 per cent in the fourth quarter of 2012. The line for the U.S. increased from 114 per cent in the first quarter of 2000 to 165 per cent in the fourth quarter of 2007. It has since declined to 139 per cent in the fourth quarter of 2012. Canada’s line was below the U.S. until the second quarter of 2011.

Since then, the Canadian rate has been above that of the U.S.

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Chart 2.19: Canadian Debt Servicing Costs Remain Affordable

Line chart shows Canada’s debt servicing costs as a share of household disposable income from the first quarter of 2000 to the fourth quarter of 2012. The line increased from 7.5 per cent at the end of 2005 to a high of over 9 per cent in the fourth quarter of 2007. The line has since declined to around 7.4 per cent.

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Chart 2.20: Canadian Household Net Worth Rising

Line chart shows Canada’s household net worth from the first quarter of 2000 to the fourth quarter of 2012. It increased from $3.4 trillion in the first quarter of 2000 to a high of $6.0 trillion in the second quarter of 2008. It then fell to $5.4 trillion in the first quarter of 2009. Since then, it has increased steadily to $7.0 trillion in the fourth quarter of 2012.

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Chart 2.21: Sustained Growth in Business Machinery and Equipment Spending

The bar chart shows the annual level of machinery and equipment spending in Ontario in 2007 dollars from 2007 to 2016 and shows that the HST was implemented in July 2010. Machinery and equipment spending fell from $28 billion in 2007 and 2008 to a low of $22 billion in 2009. It increased to $30 billion in 2012 and the Ontario Ministry of Finance projects that it will increase steadily to $37 billion in 2016.

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Chart 2.22: Exports Expected to Increase

The bar chart shows the annual level of Ontario exports in 2007 dollars from 2007 to 2016. Exports fell from $339 billion in 2007 to a low of $276 billion in 2009. Exports steadily increased to $333 billion in 2012. The Ontario Ministry of Finance projects exports will increase to $374 billion by 2016.

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Chart 2.23: Weakening Private-Sector Outlook for Growth

The bar chart shows the average private-sector projection for Ontario’s real GDP growth in the 2012 Budget, the 2012 Ontario Economic Outlook and Fiscal Review and the 2013 Budget.

The average private-sector forecast for Ontario real GDP growth for 2012 was 1.9 per cent in the 2012 Budget and 2.0 per cent in the 2012 Ontario Economic Outlook and Fiscal Review. The actual growth for 2012 was 1.6 per cent.

The average private-sector forecast for Ontario real GDP growth for 2013 was 2.3 per cent in the 2012 Budget, 2.0 per cent in the 2012 Ontario Economic Outlook and Fiscal Review and 1.6 per cent in the 2013 Budget.

The average private-sector forecast for Ontario real GDP growth for 2014 was 2.5 per cent in the 2012 Budget, and 2.4 per cent in both the 2012 Ontario Economic Outlook and Fiscal Review and 2013 Budget.

The average private-sector forecast for Ontario real GDP growth for 2015 was 2.6 per cent in the 2012 Budget and 2.5 per cent in both the 2012 Ontario Economic Outlook and Fiscal Review and 2013 Budget.

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