: Ontario Economic Accounts - Fourth Quarter of 2012

Fourth Quarter (October-December) 2012 Summary

• Ontario’s real Gross Domestic Product (GDP) was essentially unchanged in the fourth quarter of 2012, (increasing 0.2% at annual rates) after edging up 0.1% (0.3% annualized) in the third quarter.  Canadian real GDP rose 0.2% (0.6% annualized), while U.S. real GDP rose by only 0.1% (0.4% annualized).
• Consumer expenditures rose 0.5%, following a 0.4% gain in the third quarter.  Consumers increased their purchases of autos, food and beverages, alcohol and electricity in the fourth quarter.  Spending on services increased 0.4%, after rising 0.2% in the third quarter.
• Investment in residential construction advanced 2.3%, following a 1.9% decline in the third quarter.  Spending on both new housing construction (+3.3%) and renovation activities (+2.6%) propelled the fourth quarter gain while home ownership transfer costs (-0.6%) declined.
• Business investment on plant and machinery increased 1.4%, after declining 1.3% in the third quarter.  Investment in non-residential construction rose 1.5% while machinery and equipment spending grew by 1.2%.
• Businesses increased inventories by $3.2 billion ($2007), after accumulating $4.3 billion of stocks in the third quarter.
• Exports declined 1.0%, falling for the second consecutive quarter.  Imports edged up 0.2%, after two consecutive quarterly declines.  As a result, net trade was the primary drag on the economy in the quarter.
• In current dollars, GDP edged up 0.1% in the fourth quarter.  Economy-wide prices, as measured by the GDP implicit price index, were unchanged in the final quarter of 2012, after rising 0.5% in the third quarter.
• Economic production on an industry basis was unchanged in the fourth quarter of 2012. Production by goods-producing industries fell 0.4% while output by services-producing industries edged up 0.1%.

2012 Annual Overview

• Ontario’s real GDP increased 1.6% in 2012 following a 1.8% gain in 2011. Canadian real GDP advanced 1.8% while that of the U.S. rose 2.2% in 2012.
• Final domestic demand* rose 1.0% in 2012 slowing from growth of 2.4% in 2011 and 4.3% in 2010.
• Consumer spending grew 1.4% in 2012, slowing from a 2.1% increase in 2011.  Personal spending on semi-durables (+3.1%) and services (+1.8%) led growth while spending on durables (+0.9%) and non-durables (+0.2%) also increased.  Consumer purchases of motor vehicles, furniture and appliances, clothing and footwear, natural gas and gasoline all increased in 2012, while spending on electricity declined.
• Capital spending on machinery and equipment grew 3.3%, moderating from a 19.7% jump in 2011.  Investment spending on non-residential construction increased 1.4% in 2012, following a 5.3% gain in 2011.
• Investment in residential construction grew 6.5% in 2012, after rising 3.8% in 2011.  The increase was driven in large part by a 13.6% jump in new housing construction.  Renovations activity increased 2.4% while home owner transfer costs rose 0.7% in 2012.
• Government spending in real terms edged up by 0.6% in 2012, the slowest pace of increase in the past 15 years.
• Exports grew by 5.1% while imports rose 3.8% in 2012.  As a result, external trade made a significant contribution to overall growth in 2012.
• Current dollar GDP increased 2.9% in 2012, following a 4.7% gain in 2011.  Employee compensation (formerly “labour income”) advanced 2.8%, while household disposable income was up 1.8%.  The personal savings rate declined to 2.7% from 3.3% in 2011.
• The net operating surplus of corporations increased by 1.2% in 2012, following strong gains of 18.6% in 2011 and 26.2% in 2010.
• The aggregate GDP price deflator increased 1.2% in 2012.  Consumer prices were up 1.0%, down from a 2.1% advance in 2011.  Export prices declined 0.6% while import prices, particularly as a result of lower energy prices, remained unchanged in 2012.
• Real output by industry was up 1.6% in 2012, following gains of 1.8% in 2011 and 3.5% in 2010.  Goods and services-producing industries both recorded 1.6% gains in 2012.
• Manufacturing production, increased 2.7% following a 1.9% advance in 2011, supported by a 15.9% surge in auto sector (vehicles and parts) output.

*Unless otherwise indicated, all concepts refer to “real” expenditure in constant 2007 prices.

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

	2011	2012	2012q1	2012q2	2012q3	2012q4
Real GDP (Chained $ 2007)	1.8	1.6	0.4	0.6	0.1	0.0
(annualized rate)			1.8	2.3	0.3	0.2
Household spending	2.1	1.4	1.3	-0.5	0.4	0.5
Government current spending	1.1	0.6	-0.3	0.4	-0.4	-0.3
Residential construction	3.8	6.5	4.0	-2.7	-1.9	2.3
Non-residential construction	5.3	1.4	-5.4	3.5	-0.5	1.5
Machinery & equipment	19.7	3.3	-1.2	0.6	-1.8	1.2
Final Domestic Demand	2.4	1.0	0.6	-0.2	-0.2	0.5
Exports	5.7	5.1	0.5	1.6	-1.1	-1.0
Imports	7.5	3.8	0.8	-0.2	-0.7	0.2
Change in Business inventories (Chained $2007 billions)	2.0	3.0	2.8	1.7	4.3	3.2
Nominal GDP ($ Current)	4.7	2.9	0.7	0.8	0.6	0.1
Net operating surplus for corporations	18.6	1.2	-3.8	-0.6	0.2	0.2
Primary household income	3.3	2.7	1.0	1.0	0.3	0.2
Household disposable income	1.8	1.8	0.8	0.9	0.1	0.0
Implicit price index, GDP	2.8	1.2	0.3	0.2	0.5	0.0

Fourth Quarter Expenditure and Income Details

Consumer Spending Gains Continue

Real consumer spending advanced 0.5% in the fourth quarter, following a 0.4% gain in the third quarter.  

Spending on consumer durables rebounded 0.6% after declining 0.5% in the third quarter and 1.9% in the second quarter.  A 0.4% increase in motor vehicle purchases, following declines of 2.2% and 5.7% in the third and second quarters, contributed to the increase in durable spending.

Spending on non-durables increased 0.5% with higher purchases of electricity, gasoline, alcohol, pharmaceuticals and personal goods.  Expenditures on semi-durable goods edged 0.3% higher in the fourth quarter.

Household spending on services rose 0.4%, following a 0.2% gain in the third quarter.

Residential Construction Spending Increases in Fourth Quarter

Real residential construction investment spending rose a solid 2.3% in the final quarter of the year, after declines of 1.9% and 2.7% in the third and second quarters.  Both new home construction (+3.3%) and renovation activity (+2.6%) were higher in the fourth quarter, while home ownership transfer costs (-0.6%), fell for the third consecutive quarter.

Higher Business Investment in Plant and Equipment

Capital spending by Ontario businesses on plant and equipment increased 1.4%, following a 1.3% decline in the third quarter.  Investment in non-residential construction advanced 1.5% while machinery and equipment spending increased 1.2%, rebounding from a 1.8% decline in the third quarter.

Business Inventory Accumulation Moderates

Businesses increased inventories by $3.2 billion in the final quarter of 2012, after accumulating $4.3 billion in the third quarter.  Retailers and wholesalers increased inventories while manufactures reduced stocks.  Retail car dealers reported a rise in stocks while auto wholesalers held lower inventories.

Exports Fall While Imports Edge Higher

Real exports of goods and services declined 1.0%, after falling 1.1% in the third quarter. Real imports edged 0.2% higher, after falling in the previous two quarters.

International merchandise exports continued to weaken, falling 1.9%, after declining 2.2% in the third quarter.  The main sources of the overall decrease in goods exports were metal and non-metallic mineral products, chemical and plastic products and electronic equipment exports.  Gains in automotive products and industrial machinery exports helped moderate the overall merchandise goods decline.

International merchandise imports increased 0.9%, following two consecutive quarterly declines.  Rising industrial machinery and electronic equipment imports were the main sources of the overall gain.  Lower energy imports limited the overall import rise.

External trade was the primary drag on the economy in the fourth quarter, largely reflecting lower exports.

Current Dollar GDP Slows in Fourth Quarter

Gross Domestic Product measured in current dollars edged up 0.1% in the fourth quarter, down from a 0.6% third quarter gain.  Modest gains in employee compensation, corporate net operating surplus, and household rental income supported nominal GDP in the fourth quarter.

Employee compensation (formerly labour income) edged up 0.2% in the fourth quarter.

Household disposal income was unchanged in the fourth quarter, after a 0.1% gain in the previous quarter. Current dollar consumption (+0.5%) outpaced disposable income pushing Ontario’s household saving rate*, (the ratio of saving to household disposable income) down to 2.6% in the fourth quarter from 3.0% in the third quarter.

The net operating surplus of corporations (largely corporate profits), edged up 0.2%, matching the third quarter rise.

*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 Unchanged in Fourth Quarter

Economy-wide prices, as measured by the GDP implicit price index, were unchanged in the fourth quarter, after rising 0.5% in previous quarter.  The implicit price index for final domestic demand was also unchanged in the final quarter of the year.

Prices for personal consumer expenditures were unchanged for the second consecutive quarter.  Prices for motor vehicles and parts, other durable products, and pharmaceuticals and personal goods, all declined in the quarter.  Higher natural gas and gasoline prices offset these declines.

Machinery and equipment prices declined for the second consecutive quarter, falling 0.8% after dropping 2.1% in the third quarter.    Non-residential construction prices rose 0.5%, while residential construction prices advanced 1.1%, reflecting higher costs for new housing construction and renovation activity.

Export prices edged up 0.1% while import prices (0.0%) were unchanged in the fourth quarter.  The Canadian dollar appreciated a modest 0.4% against the U.S. dollar, remaining close to par during the quarter.  This contributed to stable Canadian dollar prices for both exports and imports.

Ontario Production By Industry

Highlights

Real output by industry was unchanged in the final quarter of 2012, following a 0.1% gain in the third quarter. Output in the goods-producing sector declined 0.4% while service sector output edged up by 0.1%.

The real estate (+0.8%), utilities (+5.7%) and construction (+0.9%) sectors all made positive contributions to fourth quarter output.  Production was lower in the manufacturing (-2.0%), arts, entertainment and recreation (-5.8%) and information and culture (-0.8%) sectors.

ONTARIO OUTPUT BY INDUSTRY
(% change from previous period, chained $2007)

	2011	2012	2012q1	2012q2	2012q3	2012q4
Goods Sector	1.8	1.6	0.2	1.3	-1.2	-0.4
Primary Industries	10.3	-4.0	-3.9	2.4	-4.3	0.5
Utilities	1.4	-0.6	-1.3	4.5	-3.7	5.7
Construction	-0.7	1.8	1.6	-1.8	-0.9	0.9
Manufacturing	1.9	2.7	0.4	2.1	-0.5	-2.0
Of which: Auto Industry	-1.5	15.9	6.1	4.1	0.4	-3.7
Service Sector	1.8	1.6	0.6	0.4	0.4	0.1
Wholesale Trade	2.5	0.4	1.1	0.3	0.1	0.2
Retail Trade	2.0	1.0	0.6	-0.6	0.5	0.1
Transportation and Warehousing	2.9	0.8	0.7	1.2	1.9	-0.3
Information and Cultural Industries	1.5	5.1	0.9	1.3	0.1	-0.8
Finance and Insurance	1.8	2.2	1.2	0.3	0.9	0.2
Real Estate and Leasing	2.4	2.7	0.9	1.1	0.7	0.8
Professional and Administrative Services	1.6	1.8	0.8	0.4	0.1	0.3
Management of Companies and Enterprises	0.1	-0.1	1.6	2.6	-1.0	1.2
Education	0.3	1.1	0.1	1.0	0.2	-0.4
Health Care and Social Services	1.9	1.7	0.2	0.4	0.7	-0.3
Arts, Entertainment and Recreation	-1.5	-0.7	0.3	-2.0	-0.8	-5.8
Accommodation and Food	3.3	1.8	0.4	-0.9	0.7	0.5
Other Services	1.9	0.1	0.5	-0.5	0.2	0.4
Public Administration	0.9	-0.6	-0.4	-0.3	-0.4	-0.3
Ontario Output at Basic Prices	1.8	1.6	0.5	0.6	0.1	0.0

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 not taxes on final products.

Manufacturing Output Down

The manufacturing sector’s output was 2.0% lower in the fourth quarter, following a 0.5% decline in the third quarter. 

The fourth quarter decline was wide-spread, with nine of eleven manufacturing industries reporting lower production. The transportation equipment (-3.4%), electrical and electronic (-6.0) and primary and fabricated metal (-2.8%) product industries posted notable declines.

Within the transportation equipment sector, auto industry production fell by 3.7% following five consecutive quarterly gains.  Production in “other transportation equipment”, primarily composed of the aerospace sector, declined by 2.2% in the quarter.

Partially offsetting these declines were growth in the paper products and printing (+4.8%), and chemical and petroleum products (+0.6%) industries.  

Wholesale and Retail Trade

Wholesaling activity rose 0.2% in the fourth quarter, following similar gains in the previous two quarters. Solid gains were reported by wholesalers of motor vehicles and machinery. 

Production in the retail trade sector increased 0.1% following a 0.5% gain in the third quarter. Higher output of food, health and personal care and motor vehicle retailers was moderated by declines at general merchandise and sporting goods, hobby, book and music stores.

Utilities, Construction and Natural Resources

Utilities output advanced 5.7% in the fourth quarter, following a 3.7% decline in the previous quarter. Output of electric power posted a solid 8.7% increase while production by natural gas and water distribution utilities declined 2.7%.

Construction sector output rose 0.9%, offsetting a 0.9% decline in the third quarter. Residential construction increased by 2.2% while non-residential and engineering construction was unchanged.

Mining output edged up 0.4% following a 6.9% decline in the third quarter.  Higher output at copper, nickel, lead and zinc mines supported fourth quarter growth.

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 in the finance and insurance sector advanced 0.2% in the fourth quarter, following a 0.9% gain in the third quarter. Strength in the banking sector was partially offset by lower insurance industry output.

Production in the real estate and leasing sector rose 0.8% in the fourth quarter, following a 0.7% gain in the previous quarter.

Other Service Sector Industries

Output in the arts, entertainment and recreation sector dropped sharply by 5.8% in the fourth quarter, in part due to labour disruptions in the National Hockey League.

Production was also lower in the information and culture (-0.8%) and transportation and warehousing (-0.3%) sectors. Professional and administrative services output advanced 0.3% in the fourth quarter, the sixth consecutive increase.

 

LIST OF TABLES

Income and Expenditure Data

Quarterly Data, 2009:1-2012:4

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 Deflators

Annual Data, 2009-2012

Table 7: Ontario Gross Domestic Product (Income-Based)
Table 8: Ontario Gross Domestic Product (Expenditure-Based)
Table 9: Ontario Gross Domestic Product at Chained 2007 Prices
Table 10: Sources and Disposition of Ontario Household Income
Table 11: Ontario Trade
Table 12: Ontario Deflators

Ontario Production by Industry at 2007 Prices

Table 13: Quarterly Data, 2009:1-2012:4
Table 14: Annual Data, 2009-2012

Historical tables, both annual and quarterly available from 2007.
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