: Ontario Economic Accounts - Third Quarter of 2014

January 2015
Third Quarter of 2014
(July, August, September)
Ontario Ministry of Finance

Table of Contents

Third Quarter Summary
Expenditure and Income Details
Production By Industry
List of Tables
Analytical Tables and Charts 2000:1-2014:3

THIRD QUARTER (JULY-SEPTEMBER) 2014 SUMMARY

Ontario Real GDP Accelerates in Third Quarter
  • Ontario’s real Gross Domestic Product (GDP) increased 1.0% (4.0% annualized) in the third quarter of 2014, following a 0.8% (3.2% annualized) advance in the second quarter. The strong third-quarter gain was led by higher household and business spending, along with robust export growth.
  • Household spending increased 0.8% in the third quarter, following a gain of 1.0% in the second quarter. Driving the third-quarter advance was a 3.9% rise in durable goods spending, boosted by a solid increase in automobile purchases. Spending on semi-durables (+0.6%) and services (+0.4%) also contributed to the overall rise in consumer expenditures.
  • Investment in residential construction grew 2.4% in the third quarter, following a strong 5.2% advance in the second quarter. Spending on ownership transfer costs (+6.5%) and new housing construction (+4.9%) increased, while renovation activities (-2.0%) were lower.
  • Business capital spending on machinery and equipment rose 2.5% in the third quarter, following a 3.3% gain in each of the previous two quarters. Non-residential construction edged down 0.3%.
  • Businesses increased inventories by $2.9 billion ($2007), after accumulating $4.2 billion worth of stocks in the second quarter.
  • Exports advanced 3.0% in the third quarter of 2014, the strongest quarterly gain in three years. Imports were also stronger, rising 1.0% in the third quarter. Overall, trade was the largest contributor to Ontario’s third quarter real GDP growth.
  • Current dollar GDP increased 1.5% in the third quarter of 2014, the strongest quarterly gain since the fourth quarter of 2010.  Economy-wide prices, as measured by the GDP implicit price index, advanced 0.6% in the third quarter.
  • Real economic production on an industry basis grew by 1.0% (4.1% annualized) in the third quarter of 2014, after rising 1.0% in the second quarter. Production by goods-producing industries advanced 1.3%, while output by services-producing industries increased 0.9%.
ONTARIO ECONOMIC ACCOUNTS: HIGHLIGHTS
(% change from previous period)
  2012 2013 2013q4 2014q1 2014q2 2014q3
Real GDP (Chained $ 2007) 1.7 1.3 0.4 0.2 0.8 1.0
(annualized rate)     1.8 0.8 3.2 4.0
Household spending 1.5 2.1 0.4 0.3 1.0 0.8
Government current spending 1.6 0.6 0.2 -0.1 0.4 -0.4
Residential construction 4.7 -2.3 -1.0 -2.1 5.2 2.4
Non-residential construction 7.8 -5.2 -2.6 1.0 0.2 -0.3
Machinery & equipment -2.8 -8.2 -6.0 3.3 3.3 2.5
Intellectual property products -1.3 -3.4 -1.2 -1.1 0.3 1.9
Final Domestic Demand 1.4 0.4 -0.3 0.2 1.2 0.7
Exports 3.3 1.8 0.8 -0.9 2.1 3.0
Imports 1.8 0.1 1.0 -1.3 2.3 1.0
Change in Business inventories (Chained $2007 billions) 3.6 3.7 9.0 7.7 4.2 2.9
Nominal GDP ($ Current) 3.2 2.4 0.8 1.1 0.9 1.5
Compensation of employees 3.5 2.7 0.7 1.1 0.6 0.9
Net operating surplus for corporations -0.6 0.0 3.0 2.4 2.0 3.3
Primary household income 3.6 2.9 1.0 1.3 0.7 1.0
Household disposable income 2.6 2.7 1.0 1.2 0.5 1.0
Implicit price index, GDP 1.4 1.1 0.3 0.9 0.1 0.6

THIRD QUARTER EXPENDITURE AND INCOME DETAILS

Household Spending Gains Continue In Third Quarter

Real Household Spending Continues to Rise in Third Quarter

Household spending rose 0.8% in the third of 2014, following a 1.0% increase in the second quarter.

Spending on durable goods (+3.9%) drove the third quarter gain, led by a 7.0% rise in motor vehicle purchases.

Spending on semi-durable goods increased by 0.6%, while purchases of non-durable goods (+0.4%) and services (+0.4%) also contributed to the overall rise in third-quarter household spending.

Residential Construction Higher In Third Quarter

Real Residential Construction Continues to Grow in Third Quarter

Residential construction investment grew 2.4% in the third quarter of 2014, after increasing a strong 5.2% in the second quarter. A 6.5% increase in ownership transfer costs, buoyed by higher resale activity, along with stronger new home construction (+4.9%) contributed to the third-quarter increase in housing sector investment. These gains were partially offset by a 2.0% decline in home renovation activity in the third quarter.

Business Investment in Machinery and Equipment Higher in Third Quarter

Real Machinery and Equipment Investment Continues to Advance

Investment in machinery and equipment spending rose 2.5%, the third consecutive quarterly gain, while non-residential construction decreased 0.3% in the third quarter, after edging up 0.2% in the second quarter. Investment in intellectual property products advanced 1.9% in the third quarter, after increasing 0.3% in the second quarter.

Business Inventory Accumulation Slows in Third Quarter

Change in Business Inventories

The pace of business non-farm inventory accumulation slowed to its lowest level in over a year, as businesses added $2.9 billion in inventories in the third quarter of 2014, after accumulating $4.2 billion worth of stocks in the second quarter. A significant part of the inventory buildup was due to increased stocks of durable goods at the wholesale level, particularly motor vehicle inventories.

Exports and Imports Higher in Third Quarter

Exports and Imports Continue to Rise in Third Quarter

Real exports of goods and services advanced 3.0% in the third quarter, the strongest quarterly gain since the third quarter of 2011. Real imports were also higher, increasing 1.0% in the third quarter, after rising 2.3% in the second quarter.

International merchandise exports advanced by a solid 5.7% in the third quarter, after rising 2.8% in the second quarter. Export gains were widespread, with increased exports of automotive products, electronic equipment, chemicals and metal and non-metallic mineral products.

International merchandise imports increased 1.3% in the third quarter, following a 4.2% gain in the second quarter. Higher imports of metal and non-metallic mineral products, chemicals, and machinery and equipment contributed to the third-quarter advance.

Current Dollar GDP Growth Accelerates in Third Quarter of 2014

Nominal GDP Continues to Expand in Third Quarter

Gross Domestic Product measured in current dollars increased 1.5% in the third quarter of 2014, the strongest quarterly gain in almost four years.

Compensation of employees advanced 0.9% in the third quarter of 2014, more strongly than the 0.6% gain in the second quarter. 

The net operating surplus of corporations rose by a solid 3.3%, following a 2.0% increase in the second quarter.

Household disposable income was up 1.0% in the third quarter, after rising by 0.5% in the second quarter. Ontario’s household saving rate* (the ratio of household savings to household disposable income) edged lower to 2.9% in the third quarter, as growth in current dollar household consumption (+1.1%) was slightly stronger than growth in household disposable income (+1.0%).

*Note: 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.

Prices Higher in Third Quarter

Inflation Edges Higher in Third Quarter

Economy-wide prices, as measured by the GDP implicit price index, rose 0.6% in the third quarter of 2014, after edging up 0.1% in the second quarter. The implicit price index for final domestic demand increased 0.4%, following a 0.5% gain in the second quarter.

Prices for household consumer expenditures rose 0.3% in the third quarter, following a 0.9% increase in the second quarter. Prices for motor vehicles, furniture, and clothing all advanced, but were partially offset by lower prices for natural gas and gasoline in the third quarter.

Machinery and equipment prices increased 0.8%, while non-residential construction prices were up 0.6% in the third quarter. Residential construction prices were up 1.2%, with prices for new housing construction, renovations and ownership transfer costs all increasing in the third quarter.

Both export (+0.4%) and import (+0.3%) prices rose modestly in the third quarter, as the Canadian dollar was little changed relative to the U.S. dollar during this period.  

ONTARIO PRODUCTION BY INDUSTRY

Highlights

Real or volume output by industry increased 1.0% in the third quarter of 2014, matching growth in the second quarter. Output in both the goods (+1.3%) and service (+0.9%) sectors advanced in the third quarter.

Third-quarter growth was led by gains in wholesale trade (+2.7%), primary industries (+2.4%), professional and administrative services (+1.7%) and manufacturing (+1.6%).

ONTARIO OUTPUT BY INDUSTRY
(% change from previous period, chained $2007)
  2012 2013 2013q4 2014q1 2014q2 2014q3
Goods Sector 1.9 -0.9 0.3 0.2 1.6 1.3
Primary Industries 2.2 4.5 -1.6 1.3 -2.4 2.4
Utilities -0.5 4.4 2.2 -0.9 -0.5 -2.1
Construction 2.3 -3.1 -0.9 -0.1 2.3 1.2
Manufacturing 2.0 -1.6 0.6 0.3 2.3 1.6
Of which: Auto Industry 18.5 -4.0 2.2 -3.1 4.6 1.9
Service Sector 1.5 1.9 0.5 0.0 0.8 0.9
Wholesale Trade 1.7 -0.2 0.4 -0.5 4.1 2.7
Retail Trade 1.5 2.5 0.1 -0.5 1.5 1.6
Transportation and Warehousing -0.1 0.3 1.1 0.4 1.9 1.0
Information and Cultural Industries 1.8 2.1 -0.5 1.8 -0.2 0.2
Finance and Insurance 2.2 4.2 2.2 -0.9 -0.4 0.9
Real Estate and Leasing 2.3 2.3 0.1 0.6 1.0 0.9
Professional and Administrative Services 1.5 1.6 0.0 -0.2 1.2 1.7
Management of Companies and Enterprises -0.5 1.1 -0.2 2.1 -0.6 -1.2
Education 1.8 2.6 0.9 -0.3 -0.6 0.9
Health Care and Social Services 1.7 1.4 0.5 0.2 0.4 0.6
Arts, Entertainment and Recreation -1.8 2.5 2.2 -2.6 0.3 1.0
Accommodation and Food 3.1 3.0 0.8 0.7 1.2 1.0
Other Services -0.4 3.6 1.5 0.8 1.1 0.0
Public Administration 0.0 -0.1 0.0 0.0 -0.6 -0.8
Ontario Output at Basic Prices 1.6 1.2 0.5 0.1 1.0 1.0

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 Advances

Manufacturing Output Up in Third Quarter

Manufacturing sector output advanced 1.6% in the third quarter, following a 2.3% gain in the second quarter.

Eight of eleven manufacturing industries increased production in the third quarter, with electrical and electronic (+6.0%), plastic and rubber (+5.7%), primary and fabricated metal (+3.8%) and transportation equipment (+1.6%) production leading the gain.

Auto Industry Output Advances in Third Quarter

Within the transportation equipment industry, automotive production increased by 1.9%, following a solid 4.6% gain in the second quarter. Output in “other transportation equipment”, primarily composed of the aerospace sector, was unchanged from the second quarter.

Food and Beverage Output Down in Third Quarter

Output in the food and beverage manufacturing industry was down 1.1% in the third quarter, following three consecutive quarterly gains.

Wholesale and Retail Trade Increase

Wholesale and Retail Output Increase in Third Quarter

Wholesaling activity increased 2.7% in the third quarter, after a 4.1% advance in the second quarter. Third quarter gains were led by machinery and equipment, and building materials wholesaling. 

Production in the retail trade sector rose by 1.6% in the third quarter, up slightly from a 1.5% gain in the second quarter. Motor vehicle and parts retailers recorded a solid third-quarter gain.

Utilities Decline While Construction and Natural Resources  Increase

Utilities Sector Output Down in Third Quarter

Utilities output declined by 2.1% in the third quarter, the third consecutive quarterly decline. An increase in electric power utilities (+0.7%) was more than offset by lower output of natural gas and water distribution utilities (-9.0%).

Construction Sector Output Advances in Third Quarter

Construction sector output advanced 1.2% in the third quarter, following a 2.3% increase in the second quarter. Both residential (+1.2%) and non-residential building and engineering (+1.3%) construction rose in the third quarter.

Mining output increased by a solid 6.8% in the third quarter, after edging down by 0.2% in the second quarter.  Higher output by the province’s copper, nickel, lead and zinc and gold and silver ore mines drove the third quarter increase.

Note: 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.

Finance, Insurance, Real Estate and Leasing Output Higher

Finance and Insurance Output Increases in Third Quarter

Output in the finance and insurance sector increased 0.9% in the third quarter, following two quarters of declines. Banking, insurance and investment services all contributed to the third quarter gain.

Production in the real estate and leasing sector rose 0.9% in the third quarter, following a gain of 1.0% in the second quarter.

 

 

 

Other Service Sector Industries

Professional and Administrative Services Output Up in Third Quarter

Professional and administrative services output advanced 1.7% in the third quarter, following a 1.2% gain in the second quarter.

Education (+0.9%) and health care and social (+0.6%) services also increased production, while public administration (-0.8%) output declined in the third quarter.

 

 

 

 

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

List of Tables

Income and Expenditure Data

Quarterly Data, 2011:1-2014:3

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, 2010-2013

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, 2011:1-2014:3
Table 16: Annual Data, 2010-2013

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

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