: Ontario Economic Accounts - Fourth Quarter of 2011

Fourth Quarter (OCTOBER-DECEMBER) 2011 Summary

• Ontario’s real Gross Domestic Product (GDP) increased 0.5% in the fourth quarter of 2011, after advancing 0.8% in the third quarter.  Canadian real GDP rose 0.4%, while that of the U.S. advanced 0.7%.

• Consumer expenditures edged up 0.1%, following a moderate 0.3% gain in the third quarter.  Consumers increased their purchases of autos, furniture and appliances, clothing and footwear, and food and beverages in the fourth quarter. Spending on services rose 0.1%, after remaining unchanged in the third quarter.
• Investment in residential construction continued its upward trend rising 1.5% in the fourth quarter. Spending on new housing construction (-2.2%) was lower, while expenditures on renovation activities (+3.6%) and home ownership transfer costs (+4.6%) increased.

• Business investment on plant and machinery increased 0.7%, after rising 1.3% in the third quarter. Investment in machinery and equipment advanced 0.1% while non-residential construction spending grew by 2.9%.
• Businesses increased inventories by $0.5 billion ($2002), after accumulating $3.9 billion of stocks in the third quarter. 

• Exports continued to rise, advancing 0.7% in the fourth quarter while imports declined by 0.9%. As a result, net trade contributed strongly to growth in the quarter.  
• In current dollars, GDP increased by 1.2% in the fourth quarter, following a gain of 1.0% in the third quarter.  Economy-wide prices, as measured by the GDP implicit price index, increased 0.7%, after a moderate 0.3% rise in the third quarter.   
• Economic production on an industry basis increased 0.4%.  Production by goods-producing industries advanced 1.3% while output by services-producing industries was unchanged.

2011 ANNUAL OVERVIEW

• Ontario’s real GDP advanced 1.8% in 2011 following a 3.0% gain in 2010. Canadian real GDP increased 2.5% while that of the U.S. rose 1.7% in 2011.
• Final domestic demand – the sum of consumer expenditures, business investment and government spending – increased 2.8% in 2011 after rising 4.8% in 2010. 
• Real consumer spending increased 2.1% in 2011, following a strong 3.6% gain in 2010.  Personal spending on durable (+1.6%), semi-durable (+2.7%) and non-durable (+2.4%) goods all posted solid gains. Consumer purchases of motor vehicle parts, furniture and appliances, clothing and footwear, food and beverages, electricity, natural gas and pharmaceuticals all increased in 2011. Consumer spending on motor vehicles, tobacco products and motor fuels decreased. Spending on services rose 2.2%.
• Business investment on plant and machinery rose 16.7% in 2011, after increasing 11.0% in 2010.  Real capital spending on machinery and equipment led the increase, posting a strong 19.8% gain after a solid 15.2% rise in 2010.  Real investment spending on non-residential construction rebounded by 5.6% in 2011, following a 1.6% decline in 2010.
• Investment in residential construction grew 5.1% in 2011, moderating from a robust 8.3% gain in 2010. The increase reflected strong gains in new housing construction (+8.3%) and owner transfer costs (+10.0%).
• Government spending in real terms declined 0.4% in 2011, following gains of over 5% in both 2010 and 2009.
• Real exports grew by 1.9% while real imports rose 1.8% in 2011.  As a result, external trade made a modest contribution to annual growth.
• Current dollar GDP increased 4.2% in 2011, following a 5.3% gain in 2010. Labour income advanced 3.3%, while personal income was up 3.0%. The personal savings rate declined to 2.3% from 4.1% in 2010.
• Ontario corporate profits (national accounts basis) advanced 13.8%, following a 19.1% rise in 2010.  Both financial and non-financial sectors recorded strong earnings growth.
• The aggregate GDP price deflator increased 2.4% in 2011.  Consumer prices rose 2.0%, up from a 1.6% gain in 2010. Machinery and equipment investment prices continued to decline, falling 4.7% in 2011.  Residential construction prices advanced 3.4%, after rising 3.6% in 2010.  Export prices increased 4.3%, reflecting rising Canadian dollar prices for industrial goods and materials and agricultural products. Import prices increased 5.6%, reflecting higher prices for energy products.
• Real output by industry was up 1.9% in 2011, following a 3.2% increase in 2010 and declines in 2009 (-3.2%) and 2008 (-0.4%).
• Production in the mining sector increased a solid 9.6% in 2011, after remaining unchanged in 2010.

ONTARIO ECONOMIC ACCOUNTS: HIGHLIGHTS
(% change from previous period)

	2010	2011	2011q1	2011q2	2011q3	2011q4
Real GDP (Chained $ 2002)	3.0	1.8	0.6	-0.2	0.8	0.5
(annualized rate)			2.3	-0.9	3.1	2.2
Personal spending	3.6	2.1	0.5	0.1	0.3	0.1
Government spending	5.5	-0.4	-0.6	-0.5	-0.4	-1.0
Residential construction	8.3	5.1	2.5	2.1	5.1	1.5
Non-residential construction	-1.6	5.6	4.8	0.2	3.5	2.9
Machinery & equipment	15.2	19.8	3.8	5.2	0.8	0.1
Final Domestic Demand	4.8	2.8	0.6	0.4	0.6	0.0
Exports	7.5	1.9	0.6	0.1	1.3	0.7
Imports	13.3	1.8	1.1	1.3	-0.3	-0.9
Business inventories (Chained $2002 billions)	2.1	4.3	5.0	7.6	3.9	0.5
Nominal GDP ($ Current)	5.3	4.2	1.1	0.6	1.0	1.2
Corporation profits	19.1	13.8	3.1	-1.0	3.4	9.2
Personal income	4.2	3.0	0.4	0.5	0.2	0.6
Personal disposable income	5.1	2.2	0.5	0.2	-0.2	0.7
Implicit price index, GDP	2.3	2.4	0.5	0.8	0.3	0.7

Fourth Quarter EXPENDITURE AND INCOME DETAILS

Consumer Spending Growth Eases

Real consumer spending edged up 0.1%, following  a 0.3% gain in the third quarter.  

Spending on consumer durables advanced 0.3% after declining 0.9% in the third quarter. Households increased purchases of motor vehicles (+0.2%) and furniture and appliances (+0.7%) in the quarter.

Spending on semi-durables increased 1.0% with higher purchases of clothing and footwear. Expenditures on non-durable goods declined 0.5% with lower spending on electricity, natural gas and other fuels, and drugs and personal goods.

Household spending on services edged up 0.1% in the fourth quarter, following no change in the third quarter.

Residential Construction Spending Continues to Rise

Real residential construction investment spending increased 1.5% in the fourth quarter, the fourth consecutive quarterly gain. Renovation activity continued to grow, rising 3.6%, while ownership transfer costs related to housing resales increased 4.6%. Spending on new housing construction declined 2.2%, following a 5.6% third quarter increase.

Business Investment Growth Continues

Capital spending by Ontario businesses rose 0.7% in the fourth quarter, slowing from a 1.3% increase in the third quarter.  Real machinery and equipment spending edged up 0.1%, while non-residential construction spending rose 2.9%.

Inventory Levels Edge Higher

After a strong accumulation of inventories over the previous three quarters, Ontario businesses increased inventory stocks by $0.5 billion in the fourth quarter. Retailers, particularly car dealers, reduced inventories, while manufacturers and wholesalers increased their stocks.

Exports Increase While Imports Lower

Real exports of goods and services increased 0.7%, after rising 1.3% in the third quarter. Real imports declined 0.9% in the quarter, after edging down 0.3% in the third quarter.  

International merchandise exports continued to increase, rising 1.3% in the quarter. Automotive products were the main contributor to the growth in goods exports. Exports of industrial goods and materials also increased, while exports of machinery and equipment, agricultural commodities and other consumer goods all declined.

International merchandise imports declined in the quarter. Reduced automotive products were the main source of the overall decrease in goods imports.  

Ontario’s external trade contributed strongly to overall GDP growth in the quarter, reflecting the stronger pace of export growth relative to imports.

Current Dollar GDP Increases in Fourth Quarter

Gross Domestic Product measured in current dollars grew 1.2% in the fourth quarter. Gains in labour income, corporate profits, investment income and net income of unincorporated businesses all contributed to the increase.

Labour income was up 0.4%, matching the third quarter gain.  

Personal disposal income increased 0.7%, exceeding the pace of personal consumption expenditures (+0.4%). As a result, the personal savings rate*, the ratio of savings to disposable income, increased to 2.0% in the fourth quarter from 1.7% in the third quarter.

Corporate profits, on a national accounts basis, increased 9.2% in the fourth quarter.  The fourth quarter rise in corporate earnings was broad-based with gains in both the financial and non-financial sectors.

*Note: Personal savings 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 Up 0.7%

Economy-wide prices, as measured by the GDP implicit price index, increased 0.7% in the fourth quarter, up from a 0.3% pace in the third quarter. The implicit price index for final domestic demand increased 0.5%.

Prices for personal consumer expenditures on goods and services increased 0.3%. Prices for motor vehicles and parts, food and non-alcoholic beverages, electricity, motor fuels and pharmaceuticals all increased in the quarter. Lower prices for clothing and footwear, alcoholic beverages and natural gas helped moderate consumer price gains.

Prices for business investment expenditures increased 2.1%. Machinery and equipment prices increased 3.0% in the fourth quarter, the second consecutive quarterly increase.  Non-residential construction prices rose 1.3%, while residential construction prices gained 1.6%, reflecting higher costs for new housing construction and renovation activity.   

Export prices (+1.2%) and import prices (+1.6%) both increased in the fourth quarter.  The Canadian dollar depreciated 4.2% against the U.S. dollar in the fourth quarter which tended to raise the Canadian dollar price of both exports and imports.

Ontario Production By Industry

Highlights

Real output by industry advanced 0.4% in the final quarter of 2011, following a 0.8% increase in the third quarter.  Output in the goods-producing sector increased 1.3% while service sector output was unchanged.

The manufacturing (+2.8%), information and cultural (+1.5%) and retail trade (+0.6%) sectors all posted significant fourth quarter gains.

 ONTARIO OUTPUT BY INDUSTRY
(% change from previous period, chained $2002)

	2010	2011	2011q1	2011q2	2011q3	2011q4
Goods Sector	6.2	2.5	0.0	-0.8	1.9	1.3
Primary Industries	2.4	2.5	-2.8	-2.6	-3.3	-3.1
Utilities	0.8	3.2	-3.1	3.5	-1.2	-2.4
Construction	8.6	4.1	0.5	0.8	3.6	0.0
Manufacturing	6.5	1.8	0.5	-1.7	2.2	2.8
Of which: Auto Industry	24.6	0.1	5.0	-5.8	7.5	7.0
Service Sector	2.3	1.8	0.7	-0.2	0.5	0.0
Wholesale Trade	5.8	1.6	2.1	-0.5	0.8	-1.7
Retail Trade	3.9	0.9	-0.1	-0.9	-0.1	0.6
Transportation and Warehousing	4.7	3.5	1.7	-0.9	0.4	-0.7
Information and Cultural Industries	0.9	0.8	-1.4	-1.8	0.2	1.5
Finance, Insurance, Real Estate and Renting	1.8	2.0	1.2	-0.3	0.8	0.1
Professional and Administrative Services	0.4	2.3	0.8	0.2	0.0	0.1
Education	2.2	0.4	0.3	-0.2	0.6	-0.3
Health Care and Social Services	1.6	2.3	0.9	0.5	0.7	0.7
Arts, Entertainment and Recreation	0.5	-1.1	-1.7	0.6	1.8	2.0
Accommodation and Food	4.2	5.0	1.3	1.1	0.9	0.1
Other Services	1.1	1.6	0.1	1.3	-1.1	-0.2
Public Administration	3.0	1.4	-0.6	0.0	0.7	-0.2
Ontario Output at Basic Prices	3.2	1.9	0.6	-0.4	0.8	0.4
(annualized rates)			2.2	-1.4	3.4	1.4

Note:  Output by industry is defined as real gross domestic product (GDP) at basic prices in chained 2002 dollars.  GDP at basic prices includes taxes net of subsidies on labour and capital inputs, but excludes taxes on final products.

Manufacturing Output Advances in Fourth Quarter

The manufacturing sector’s output advanced 2.8% in the fourth quarter of 2011, accelerating from a 2.2% increase in the third quarter.  Seven of the eleven manufacturing industries included in the Ontario Economic Accounts increased production in the fourth quarter. 

The transportation equipment sector was by far the leading contributor to growth in the quarter, increasing a strong 9.0%.  Within the sector, auto industry production rose 7.0% as both motor vehicle assembly and parts were up.  The other transportation equipment* category also posted a strong gain (+15.0%) in the quarter.

Paper products and printing industry output declined 1.4% in the fourth quarter, the third consecutive quarterly decrease.

*The other transportation equipment category includes the aerospace, railroad rolling stock and ship and boat building industries.

Wholesale and Retail

Wholesale trade output declined 1.7% in the fourth quarter. Reduced activity was recorded across a number of subsectors including motor vehicles.

Production in the retail trade sector rebounded 0.6% after declining 0.1% in the third quarter.  New car dealers and auto parts and accessories stores were contributors to the quarterly increase.

Construction, Utilities and Resources

Construction sector output was unchanged in the fourth quarter of 2011, after rising 3.6% in the third quarter. Residential construction rose 1.2% but was offset by a 0.8% decline in non-residential and engineering construction. 

Utilities output decreased 2.4% in the fourth quarter as unseasonably warm weather resulted in lower demand for both electricity and natural gas. Mining output declined 3.3%, reflecting decreased production in gold and silver ore mines.

Note: Construction industry output is measured by the value added of the industry. This is a different statistical measure than the construction investment spending estimates included as part of expenditure-based Gross Domestic Product.

Education, Health Care and Public Administration

Education services output declined slightly (-0.3%) in the fourth quarter, but remained relatively steady throughout 2011.  Production in the health care and social services sector grew 0.7%, matching output growth in the third quarter.  Public administration output edged down 0.2%.

Finance, Insurance and Real Estate and Leasing*

Real output of the finance, insurance and real estate and leasing sector edged up 0.1% in the fourth quarter boosted by gains in the banking and insurance industries.

* This sector (NAICS 5A) includes the finance, insurance, real estate and renting and leasing and management industries.

Other Service Sectors

In the information and culture sector (which includes telecommunications), production increased 1.5% in the fourth quarter, the strongest pace of growth in a year.

The transportation and warehousing sector was down 0.7% in the fourth quarter, following a 0.4% increase in the third quarter of 2011.

 

LIST OF TABLES

Income and Expenditure Data

Quarterly Data, 2008:1-2011:4

Table 1: Ontario Gross Domestic Product (Income-Based)
Table 2: Ontario Gross Domestic Product (Expenditure-Based)
Table 3: Ontario Gross Domestic Product at Chained 2002 Prices
Table 4: Sources and Disposition of Ontario Personal Income
Table 5: Ontario Trade
Table 6: Ontario Deflators

Annual Data, 2008-2011

Table 7: Ontario Gross Domestic Product (Income-Based)
Table 8: Ontario Gross Domestic Product (Expenditure-Based)
Table 9: Ontario Gross Domestic Product at Chained 2002 Prices
Table 10: Sources and Disposition of Ontario Personal Income
Table 11: Ontario Trade
Table 12: Ontario Deflators

Ontario Production by Industry at 2002 Prices

Table 13: Quarterly Data, 2008:1-2011:4
Table 14: Annual Data, 2008-2011

Historical tables, both annual and quarterly available from 1981.
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Analytical Tables and Charts 1997:I-2011:IV