: Ontario Economic Accounts - Fourth Quarter of 2014

April 2015
Fourth Quarter of 2014
(October, November, December)
Ontario Ministry of Finance

Table of Contents

Fourth Quarter Summary
2014 Annual Overview
Real Expenditure Details
Income Details
Production By Industry
List of Tables
Analytical Tables and Charts 2000:1-2014:4

FOURTH QUARTER (OCTOBER-DECEMBER) 2014 SUMMARY

Ontario Real GDP Continues to Expand in Fourth Quarter
  • Ontario’s real Gross Domestic Product (GDP) increased 0.6% (2.5% annualized) in the fourth quarter of 2014, after rising 1.1% (4.5% annualized) in the third quarter.  Household spending and inventory accumulation were the main drivers of economic growth in final quarter of 2014.
  • Household spending rose 0.7% in the fourth quarter, following a 0.8% advance in the third quarter.  The fourth-quarter increase was led by a 1.2% rise in non-durable goods spending and a 0.5% increase in spending on services. Spending on durable goods was also higher, rising 1.0% in the fourth quarter, largely reflecting stronger sales of motor vehicles and parts.
  • Investment in residential construction was unchanged in the fourth quarter, after increasing 2.3% in the third quarter.  Higher spending on renovation activities (+1.0%) and new housing construction (+0.6%) was offset by lower ownership transfer costs (-2.5%) in the fourth quarter.
  • Business investment in machinery and equipment declined 0.3% in the fourth quarter, following three consecutive quarterly gains, while non-residential investment spending edged up 0.1% for the second consecutive quarter.  Capital spending on intellectual property products increased by 0.2%, after advancing 0.7% in the third quarter.
  • Non-farm inventories increased by $5.4 billion, following a $1.7 billion advance in the third quarter.
  • Exports rose 0.4% in the fourth quarter, following a strong 3.0% advance in the third quarter. Imports expanded 1.5%, after increasing 1.0% in the third quarter.
  • Current dollar GDP edged up 0.1% in the fourth quarter, following a strong 1.5% advance in the third quarter.  Economy-wide prices, as measured by the GDP implicit price index, declined 0.5% in the fourth quarter of 2014.
  • Real GDP on an industry basis grew by 0.6% (2.2% annualized) in the fourth quarter, after rising 1.0% in the third quarter. Production by services-producing industries rose 0.7%, while output by goods-producing industries was unchanged from the third quarter.

2014 ANNUAL OVERVIEW

  • Ontario real GDP increased 2.2% in 2014, the strongest annual gain since 2011, driven by household consumption spending and net external trade.
  • Final domestic demand rose 1.4% in 2014, accelerating from 0.4% in 2013.
  • Household final consumption expenditure grew 2.5% in 2014, the strongest annual advance since 2010.  Household spending on durable (+6.4%), semi-durable (+1.4%) and non-durable (+1.4%) goods all increased.  Spending on services (+2.3%) also advanced in 2014.  Consumer purchases of motor vehicles and parts, furniture and appliances, gasoline and natural gas all increased strongly in 2014.
  • Capital spending on machinery and equipment rose 0.7% in 2014, after declining in the previous two years.  Investment spending on non-residential construction decreased 1.8%, following a 5.2% decline in 2013.  Investment in intellectual property products was down 2.1% in 2014, following a 3.4% decrease in 2013.
  • Investment in residential construction increased 0.7% in 2014.  The gain was driven in large part by increased renovation activity.  Spending on home ownership transfer costs also increased, reflecting higher home sales, while new home construction declined for the second consecutive year.
  • Exports grew by 3.5%, while imports advanced 2.1% in 2014.  As a result, net external trade was a significant contributor to overall growth.
  • Current dollar GDP increased 3.6% in 2014, accelerating from a 2.4% gain in 2013.
  • Employee compensation increased 3.0% in 2014, following a 2.7% advance in 2013.  The net operating surplus of Ontario corporations rose 8.0% in 2014, after remaining unchanged in 2013.
  • Economy-wide prices, as measured by the implicit price index for GDP, increased 1.4% in 2014, following a 1.1% rise in 2013.
  • Household disposable income rose 3.2%, after increasing 2.7% in 2013.  Ontario’s household savings rate declined to 3.2% from 4.6% in 2013.
  • Real output measured on an industry basis advanced 2.3% in 2014, accelerating from a 1.2% gain in 2013.  Production by services-producing industries rose 2.5%, while output by goods-producing industries grew by 1.6% in 2014.
ONTARIO ECONOMIC ACCOUNTS: HIGHLIGHTS
(% change from previous period)
  2013 2014 2014q1 2014q2 2014q3 2014q4
Real GDP (Chained $2007) 1.3 2.2 0.2 0.8 1.1 0.6
(annualized rate)     0.6 3.2 4.5 2.5
Household spending 2.1 2.5 0.2 1.0 0.8 0.7
Government current spending 0.6 0.7 -0.1 0.5 -0.5 0.7
Residential construction -2.3 0.7 -2.1 4.7 2.3 0.0
Non-residential construction -5.2 -1.8 1.2 0.6 0.1 0.1
Machinery & equipment -8.2 0.7 3.6 4.7 3.0 -0.3
Intellectual property products -3.4 -2.1 -0.3 -1.9 0.7 0.2
Final Domestic Demand 0.4 1.4 0.1 1.1 0.7 0.6
Exports 1.8 3.5 -0.6 2.4 3.0 0.4
Imports 0.1 2.1 -1.2 2.4 1.0 1.5
Change in Business inventories (Chained $2007 billions) 3.7 4.5 6.8 4.0 1.7 5.4
Nominal GDP ($Current) 2.4 3.6 1.1 0.9 1.5 0.1
Compensation of employees 2.7 3.0 1.1 0.7 1.0 0.4
Net operating surplus for corporations 0.0 8.0 1.2 2.8 3.2 -3.1
Primary household income 2.9 3.4 1.2 0.8 0.9 0.6
Household disposable income 2.7 3.2 1.2 0.5 0.9 0.4
Implicit price index, GDP 1.1 1.4 1.0 0.2 0.4 -0.5

FOURTH QUARTER REAL EXPENDITURE DETAILS

Household Spending Up In Fourth Quarter

Real Household Spending Continues to Rise in Fourth Quarter

Household spending rose 0.7% in the fourth quarter of 2014, after increasing 0.8% in the third quarter.  Spending on non-durable goods led the fourth quarter gain, driven by a strong increase in gasoline purchases.

Spending on durable goods rose 1.0%, following a 3.1% advance in the third quarter.  Purchases of motor vehicles and parts continued to increase strongly in the fourth quarter of 2014.

Household spending on services and semi-durable goods both grew at a 0.5% pace in the fourth quarter.

Residential Construction Unchanged In Fourth Quarter

Real Residential Construction Unchanged in Fourth Quarter

Residential construction investment spending was unchanged in the fourth quarter of 2014, after advancing 2.3% in the third quarter.  Spending on home renovations increased 1.0%, following a 1.2% decline in the third quarter.  New home construction rose 0.6%, slowing from a 4.0% rise in the third quarter.  These gains were offset by a 2.5% decline in home ownership transfer costs, reflecting a moderation in the home resale market in the fourth quarter of 2014.

Business Investment Moderates

Real Machinery and Equipment Investment Lower in Fourth Quarter

Capital spending by Ontario businesses on machinery and equipment edged down 0.3% in the fourth quarter of 2014, following three consecutive quarterly gains.  Non-residential construction spending edged up 0.1% for the second consecutive quarter.  Investment in intellectual property products rose 0.2% after increasing 0.7% in the third quarter.

Business Inventories Expand in Fourth Quarter of 2014

Change in Business Inventories

Businesses added $5.4 billion ($2007) to non-farm inventories in the fourth quarter of 2014, after accumulating $1.7 billion worth of stocks in the third quarter.  A significant part of the inventory buildup in the fourth quarter reflected increased stocks of durable goods at the wholesale and retail levels, particularly motor vehicles.

Exports and Imports Higher in Fourth Quarter

Exports and Imports Continue to Rise in Fourth Quarter

Real exports of goods and services increased 0.4% in the fourth quarter, slowing from a 3.0% gain in the previous quarter.  Real imports were also higher, increasing 1.5% in the final quarter of 2014, after rising 1.0% in the third quarter.

International merchandise exports edged down 0.3% in the fourth quarter, following a 5.8% gain in the third quarter of 2014.  Exports of automotive products and consumer goods were lower in the fourth quarter, while industrial and electronic equipment exports were higher.  International merchandise imports increased 2.5% in the fourth quarter, the third consecutive quarterly advance.  Higher imports of metal and non-metallic mineral products, chemicals, automotive products and machinery and equipment contributed to the fourth-quarter advance.

FOURTH QUARTER INCOME DETAILS

Current Dollar GDP Edges Up in Fourth Quarter

Nominal GDP Growth Slows in Fourth Quarter

Gross Domestic Product measured in current dollars edged up 0.1% in the fourth quarter of 2014, following a strong 1.5% advance in the third quarter.

Compensation of employees rose 0.4%, after increasing 1.0% in the third quarter.  Wages and salaries (+0.4%) and employers’ social contributions (+0.6%) both contributed to the fourth quarter gain.

The net operating surplus of corporations decreased 3.1% in the fourth quarter, after five consecutive quarters of growth.

Household disposable income was up 0.4% in the fourth quarter, after rising by 0.9% in the third quarter.  Ontario’s household saving rate* declined to 2.6% in the fourth quarter of 2014.

*Household saving is calculated in the System of National Accounts as the difference between the amount households receive as current income and their outlays for taxes and personal consumption.

Economy-wide Prices Decline in Fourth Quarter

Economy-Wide Prices Decline in Fourth Quarter

Economy-wide prices, as measured by the GDP implicit price index, declined 0.5% in the fourth quarter of 2014, after increasing 0.4% in the third quarter.  The implicit price index for final domestic demand edged up 0.1%, following a 0.4% gain in the third quarter.

Household consumer prices edged up 0.1% in the fourth quarter, easing from a 0.2% rise in the third quarter.  Prices for motor vehicles, furniture, and clothing all advanced, but were partially offset by lower prices for gasoline in the fourth quarter.

Machinery and equipment prices increased 2.1%, the largest quarterly advance since the fourth quarter of 2008.  Non-residential construction prices increased 0.4% in the fourth quarter.  Residential construction prices were up 0.8%, with prices for renovations and ownership transfer costs increasing in the fourth quarter.

Both export (+0.4%) and import (+1.3%) prices rose in the fourth quarter, as the Canadian dollar depreciated 4.1% relative to the U.S. dollar during this period.

ONTARIO PRODUCTION BY INDUSTRY

Highlights

Real (or volume) output by industry increased 0.6% in the fourth quarter of 2014, following gains of 1.0% in the second and third quarters. Output in the service sector advanced 0.7% in the fourth quarter, while output in the goods sector was unchanged.

Higher output in the wholesale trade (+1.3%), finance and insurance (+1.2%) and real estate and leasing (+0.9%) sectors were major contributors to the fourth-quarter gain.

ONTARIO OUTPUT BY INDUSTRY
(% change from previous period, chained $2007)
  2013 2014 2014q1 2014q2 2014q3 2014q4
Goods Sector -0.9 1.6 0.2 1.5 1.0 0.0
Primary Industries 4.5 -1.8 1.5 -2.0 2.9 -3.9
Utilities 4.4 1.2 -0.4 0.0 -2.2 3.6
Construction -3.1 -0.8 -0.3 1.6 1.1 -0.1
Manufacturing -1.6 3.0 0.3 2.3 1.2 0.1
Of which: Auto Industry -4.0 5.1 -2.5 4.4 2.2 3.0
Service Sector 1.9 2.5 0.0 0.9 1.1 0.7
Wholesale Trade -0.2 4.8 -0.8 3.5 2.9 1.3
Retail Trade 2.5 3.0 -0.6 1.7 1.6 1.0
Transportation and Warehousing 0.3 3.6 0.3 2.2 1.1 0.7
Information and Cultural Industries 2.1 3.0 1.7 -0.1 0.0 -0.5
Finance and Insurance 4.2 3.8 -0.6 0.0 1.9 1.2
Real Estate and Leasing 2.3 2.8 0.7 1.1 1.0 0.9
Professional and Administrative Services 1.6 2.0 -0.3 1.3 1.6 0.5
Management of Companies and Enterprises 1.1 0.6 1.7 -0.8 -1.0 3.4
Education 2.6 1.4 -0.4 -0.4 1.0 1.4
Health Care and Social Services 1.4 1.6 0.2 0.3 0.4 0.1
Arts, Entertainment and Recreation 2.5 1.5 -2.8 0.3 1.1 0.5
Accommodation and Food 3.0 3.9 0.8 1.6 1.0 0.3
Other Services 3.6 3.6 0.7 1.1 0.0 -0.1
Public Administration -0.1 -0.6 0.1 -0.7 -1.0 0.3
Ontario Output at Basic Prices 1.2 2.3 0.1 1.0 1.0 0.6

Note: Output by industry is defined as real gross domestic product (GDP) at basic prices in chained 2007 dollars.  GDP at basic prices includes taxes net of subsidies on labour and capital inputs, but not taxes on final products.

Manufacturing Output Edges Higher

Manufacturing Output Up in Fourth Quarter

Manufacturing sector output rose 0.1% in the fourth quarter, following a 1.2% gain in the third quarter.

Four of eleven manufacturing industries increased production in the fourth quarter, with solid gains in machinery (+2.8%) and transportation equipment (+2.5%).

Auto Industry Output Advances in Fourth Quarter

Within the transportation equipment industry, automotive production increased by 3.0%, following strong increases in the previous two quarters. Output in “other transportation equipment”, which is primarily composed of the aerospace sector, declined 0.9% from the third quarter.

Electrical and Electronic Products Output Down in Fourth Quarter

Output in the electrical and electronic products manufacturing industry was down 5.6% in the fourth quarter, following three consecutive quarterly gains.  There was also lower output in chemical and petroleum (-1.8%) and food and beverage (-0.5%) products.

Utilities Output Higher

Utilities Sector Output Up in Fourth Quarter

Utilities output increased by 3.6% in the fourth quarter, following a 2.2% decline in the third quarter. Output by electric power utilities (+4.4%) and natural gas and water distribution utilities (+1.2%) were both higher.

Construction Output Edges Down

Construction Sector Output Down in Fourth Quarter

Construction* sector production edged down 0.1% in the fourth quarter, following a 1.1% increase in the third quarter. Declines in residential construction (-0.3%) were partly offset by gains in non-residential building and engineering (+0.1%) construction in the quarter.

*Construction industry output is measured by the value added of the industry. Construction investment, as reported in the expenditure-based GDP accounts, measures the spending on new construction projects.

Wholesale and Retail Trade Increase

Wholesale and Retail Output Increase in Fourth Quarter

Wholesaling activity increased 1.3% in the fourth quarter, slowing from a 2.9% advance in the third quarter. Fourth quarter gains were led by building materials and motor vehicle and parts wholesaling. 

Output in the retail trade sector rose by 1.0% in the fourth quarter, following a 1.6% gain in the third quarter. Gains in motor vehicle and parts retailing, along with electronics and appliance stores supported the quarterly increase.

Finance, Insurance, Real Estate and Leasing Output Higher

Finance and Insurance Output Increases in Fourth Quarter

Output in the finance and insurance sector increased 1.2% in the fourth quarter, following a 1.9% increase in the third quarter. Higher output in banking services led the fourth quarter increase, while investment services also posted higher output in the quarter.

Output in the real estate and leasing sector rose 0.9% in the fourth quarter.

Other Service Sector Industries

Professional and Administrative Services Output Rises in Fourth Quarter

Professional and administrative services output advanced 0.5% in the fourth quarter, following a   1.6% gain in the third quarter.

Output in the education sector (+1.4%) rose strongly, while health and social services output edged up 0.1% in the fourth quarter.

Structure of the Ontario Economy, 2013  Per Cent Share of Nominal GDP

List of Tables

Income and Expenditure Data

Quarterly Data, 2011:1-2014:4

Table 1: Ontario Gross Domestic Product (Income-Based)
Table 2: Ontario Gross Domestic Product (Expenditure-Based)
Table 3: Ontario Gross Domestic Product at Chained 2007 Prices
Table 4: Sources and Disposition of Ontario Household Income
Table 5: Ontario Trade
Table 6: Ontario Trade (Chained 2007 Prices)
Table 7: Ontario Deflators

Annual Data, 2011-2014

Table 8: Ontario Gross Domestic Product (Income-Based)
Table 9: Ontario Gross Domestic Product (Expenditure-Based)
Table 10: Ontario Gross Domestic Product at Chained 2007 Prices
Table 11: Sources and Disposition of Ontario Household Income
Table 12: Ontario Trade
Table 13: Ontario Trade (Chained 2007 Prices)
Table 14: Ontario Deflators

Ontario Production by Industry at 2007 Prices

Table 15: Quarterly Data, 2011:1-2014:4
Table 16: Annual Data, 2011-2014

Historical tables, both annual and quarterly available from 1981.
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Analytical Tables and Charts 2000:I-2014:IV

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