: Ontario Economic Accounts - Third Quarter of 2011

Third Quarter (JULY-SEPTEMBER) 2011 Summary

• Ontario’s real Gross Domestic Product (GDP) increased 0.7% in the third quarter of 2011, rebounding from a 0.2% decline in the second quarter. Real GDP has increased 5.8% over the past nine quarters since recovery began in 2009Q3.
• Consumer expenditures on goods and services continued their upward trend, increasing 0.2%. Consumers increased their purchases of auto parts, furniture and appliances, electricity, drugs and personal goods, alcoholic beverages and other semi-durable and non-durable goods. Spending on services remained unchanged.
• Business investment in plant and equipment was little changed in the quarter, following six consecutive quarterly gains.  Investment in machinery and equipment edged down 0.2% while non-residential construction spending advanced 0.7%.
• Investment in residential construction rose 5.2% in the third quarter. Expenditures on new housing construction increased 5.7%, while renovation activity increased 6.2%. Spending on ownership transfer costs relating to housing resales advanced 2.4% after declining 4.3% in the second quarter.
• Businesses accumulated $4.0 billion ($2002) in inventories in the third quarter, following a $7.4 billion build-up in the second quarter.   
• Exports advanced 1.1% while imports declined 0.6% in the third quarter.  As a result, external trade contributed strongly to growth in the quarter.
• In current dollars, GDP increased by 1.0% in the third quarter to $639.4 billion.  Economy-wide prices, as measured by the GDP implicit price index, increased 0.3%, decelerating from an increase of 0.5% in the second quarter.
• Economic production estimated on an industry basis increased 0.9%.  Production by goods-producing industries increased 1.8%, while that of services-producing industries advanced 0.5%.

ONTARIO ECONOMIC ACCOUNTS: HIGHLIGHTS
(% change from previous period)
	2009	2010	2010q4	2011q1	2011q2	2011q3
Real GDP (Chained $ 2002)	-3.2	3.0	0.7	0.6	-0.2	0.7
(annualized rate)			3.0	2.4	-0.8	2.7
Personal spending	0.2	3.6	1.3	0.5	0.3	0.2
Government spending	5.3	5.5	0.6	0.1	0.2	-0.1
Residential construction	-8.7	8.3	-0.7	2.4	2.0	5.2
Non-residential construction	-11.4	-1.6	-0.4	4.3	-0.2	0.7
Machinery & equipment	-18.5	15.2	3.3	2.3	5.8	-0.2
Final Domestic Demand	-0.8	4.8	1.0	0.7	0.7	0.4
Exports	-12.6	7.5	1.2	1.1	-0.5	1.1
Imports	-10.4	13.3	-1.7	1.4	1.1	-0.6
Business inventories (Chained $2002 billions)	-2.9	2.1	-3.2	4.9	7.4	4.0
Nominal GDP ($ Current)	-0.9	5.3	1.8	1.2	0.3	1.0
Corporation profits	-14.9	19.1	7.9	3.2	-3.2	3.1
Personal income	0.2	4.2	1.8	0.3	0.7	0.1
Personal disposable income	1.7	5.1	1.9	0.4	0.5	-0.4
Implicit price index, GDP	2.4	2.3	1.1	0.6	0.5	0.3

EXPENDITURE AND INCOME DETAILS

Consumer Spending Advances

Real consumer spending on goods and services continued to grow, rising 0.2% in the third quarter.  

Consumers increased purchases of semi-durable (+1.2%) and non-durable (+0.8%) goods in the third quarter. Real expenditures on clothing and footwear, other semi-durable goods, drugs and personal goods, motor and other fuels, electricity and alcoholic beverages increased, while spending on natural gas and tobacco products declined in the quarter.

Purchases of consumer durables declined 0.7%, as household spending on new and used motor vehicles fell 1.9%.  In contrast, consumer purchases of auto repairs and parts (+0.2%), furniture and appliances (+0.1%) and other durable goods (+0.3%) advanced.

Household purchases of services were little changed, following nine consecutive quarterly gains.

Business Investment Unchanged

Real capital spending on plant and equipment by Ontario businesses was little changed after increasing at an average quarterly rate of 4.9% in the previous six quarters. Real machinery and equipment spending edged down 0.2%, following six straight quarterly increases. Real non-residential construction spending rose 0.7%, following a small 0.2% decline in the second quarter.

Residential Construction Higher

Real residential construction investment remained robust, advancing 5.2% in the third quarter. The increase was driven by stronger renovation activity (+6.2%) and new housing construction expenditure (+5.7%). Spending on ownership transfer costs relating to housing resales advanced 2.4%.  

Inventory Levels Up

Ontario businesses increased inventories by
$4.0 billion in the third quarter. Retail and wholesale trade accounted for most of the accumulation with firms building up stocks of durable goods and motor vehicles in particular. Inventory accumulation, however was less than it had been in the second quarter. As a result, the smaller build-up subtracted from GDP and lowered the growth rate in the third quarter by 0.7 percentage points.

 

Exports Increase, Imports Decline

Ontario real exports of goods and services (+1.1%) increased while imports (-0.6%) declined in the third quarter. As a result, external trade contributed strongly to growth in the third quarter.

International goods exports increased 1.8% following a 2.5% decline in the second quarter. Higher exports of machinery and equipment, other consumer goods and industrial goods and materials contributed to the overall advance. Partially offsetting these gains were lower auto exports, which declined for the second consecutive quarter.  

International merchandise imports decreased 1.0% after rising 1.9% in the second quarter. All categories of merchandise imports posted declines except for autos and agricultural and fishing. Lower imports of machinery and equipment and energy products contributed the most to the overall decline in goods imports in the quarter.   

Interprovincial exports of goods and services increased by 0.4% while interprovincial imports increased 0.9%.

Current Dollar GDP Growth Accelerates in Third Quarter

Gross Domestic Product measured in current dollars increased 1.0% in the third quarter, following a 0.3% gain in the second quarter. Gains in labour income, corporate profits and net income of unincorporated businesses contributed to the increase.

Labour income was up 0.4%, rising from 0.2% growth in the second quarter.  Employment, measured by the payroll survey, increased 0.7% in the quarter.

Personal disposal income declined 0.4% in the third quarter, following a 0.5% gain in the second quarter when households received $1.3 billion in Ontario Sales Tax Transition Benefit payments. Personal consumption expenditures increased 0.6%. As a result, the personal savings rate*, the ratio of savings to disposable income, fell to 1.5% in the third quarter from 2.5% in the second quarter.

Corporate profits, on a national accounts basis, increased 3.1% in the third quarter, as earnings increased for both financial and non-financial enterprises.

*Note: Personal savings is calculated in the System of National Accounts as the difference between the amount households receive as income and their outlays on taxes and personal consumption.

Prices Rise 0.3% in Third Quarter

Economy-wide prices, as measured by the GDP implicit price index, rose 0.3% in the third quarter, decelerating from a 0.5% pace in the second quarter. The implicit price index for final domestic demand rose 0.6%.

Prices for personal consumer expenditures on goods and services increased 0.4% reflecting higher prices for motor vehicles, food and non-alcoholic beverages, alcoholic beverages bought in stores and natural gas. Lower prices for auto parts and other durable goods, clothing and footwear, motor and other fuels, electricity and drugs and personal goods helped moderate overall consumer price gains.

Prices for business investment expenditures increased 1.4%, after a small (+0.1%) rise in the previous quarter. Machinery and equipment prices rose 1.5%, the first increase since the first quarter of 2009.  Non-residential construction prices increased 1.6%. Residential construction prices advanced 1.2%, reflecting higher costs for new houses and renovation.   

Export prices (+0.9%) were up, as international prices for industrial goods and materials, machinery and equipment, autos and “other” consumer goods increased in the quarter. International prices for agricultural and fishing, energy and forestry products were all lower in the quarter. Import prices rose 0.7% in the third quarter, after a 1.6% advance in the second quarter.   

Ontario Production By Industry

Highlights

Real output by industry advanced 0.9% in the third quarter, following a 0.3% decline in the second quarter. Both the goods-producing (+1.8%) and service (+0.5%) sectors posted gains.

The manufacturing (+2.2%), construction (+3.5%) and finance (+0.7%) sectors all posted solid growth in the quarter.  Production was lower in the utilities (-1.1%), professional and administrative services (-0.2%) and primary (-2.5%) sectors.

ONTARIO OUTPUT BY INDUSTRY
(% change from previous period, chained $2002)
	2009	2010	2010q4	2011q1	2011q2	2011q3
Goods Sector	-12.6	6.2	0.8	0.4	-0.7	1.8
Primary Industries	-13.0	2.4	6.8	-0.6	-2.7	-2.5
Utilities	-8.8	0.8	2.7	-3.1	4.2	-1.1
Construction	-4.8	8.6	1.4	0.7	1.2	3.5
Manufacturing	-15.7	6.5	-0.4	0.8	-1.7	2.2
Of which: Auto Industry	-33.1	24.6	-8.4	5.6	-6.6	6.4
Service Sector	-0.2	2.3	1.2	0.7	-0.2	0.5
Wholesale Trade	-6.0	5.8	1.7	2.0	-0.6	1.1
Retail Trade	-0.1	3.9	2.0	-0.1	-0.7	0.2
Transportation and Warehousing	-6.0	4.7	1.9	1.9	-0.7	0.7
Information and Cultural Industries	-0.4	0.9	3.0	-1.1	-1.4	0.4
Finance, Insurance, Real Estate and Leasing	1.7	1.8	1.1	1.2	-0.4	0.7
Professional and Administrative Services	-2.6	0.4	1.2	0.8	0.2	-0.2
Education	2.2	2.2	-0.4	0.4	-0.1	0.9
Health Care and Social Services	2.3	1.6	0.6	0.9	0.5	0.7
Arts, Entertainment and Recreation	0.0	0.5	-0.1	-1.5	0.6	1.5
Accommodation and Food	-3.7	4.2	1.9	1.2	1.1	0.8
Other Services	-0.4	1.1	0.7	0.2	1.3	-1.1
Public Administration	3.2	3.0	1.1	-0.6	0.1	0.7
Ontario Output at Basic Prices	-3.2	3.2	1.1	0.6	-0.3	0.9
(annualized rates)			4.3	2.6	-1.3	3.5

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 Rises

The manufacturing sector’s output increased 2.2% in the third quarter and was the leading contributor to overall growth.  The advance more than offsets a 1.7% decline posted in the second quarter.

Six of the eleven manufacturing industries included in the Ontario Economic Accounts expanded production in the third quarter, with the transportation equipment sector (+6.0%) driving production gains.

 

 

 

 

Within the transportation equipment sector, auto industry production increased a robust 6.4%, as both auto assembly (+8.8%) and parts manufacturing (+3.9%) were up. The third quarter increase follows a 6.6% decline in the second quarter which reflected supply chain disruptions caused by the tsunami in Japan. 

Solid output gains were also recorded in the chemical and petroleum products (+5.1%) and machinery (+4.1%) industries.

 

 

 

The food, beverage and tobacco products industry declined 0.3%.

Wholesale and Retail

Wholesale trade output increased 1.1%, after declining 0.6% in the second quarter.  Increased activity by wholesalers of food, beverage and tobacco products and personal and household goods contributed to the third quarter gain.

Production in the retail trade sector increased slightly (+0.2%), following two consecutive quarterly decreases.  Increased sales by food and beverage stores led the overall increase in the retailing industry.

 

 

Construction, Utilities and Resources

Construction sector output increased 3.5% in the third quarter, the fastest pace of growth since the end of 2009.  Residential construction increased 7.6%, posting the sharpest gain since the fourth quarter of 2009.  Non-residential and engineering construction (+1.0%) was also up.

Utilities output was down 1.1%, following a 4.2% increase in the second quarter.  Electric power output declined 1.7%, more than offsetting a 1.2% increase in natural gas and water distribution.

 

 

Mining output decreased 3.0%, following a 0.7% increase in the second quarter. 

 

 

 

 

 

 

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.

Education, Health Care and Public Administration

Education services output increased 0.9% after edging down 0.1% in the second quarter.

Production in the health care and social services and public administration sectors both increased 0.7% in the third quarter.

 

 

 

 

Finance, Insurance and Real Estate and Leasing*

Output in the finance, insurance and real estate and leasing sector rose 0.7%, following a 0.4% decline in the previous quarter. 

Gains in a number of industries – including banking (+1.5%) – contributed to the increase.  

 

 

 

 

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

Other Service Sector Industries

Transportation and warehousing output increased 0.7%, rebounding from a 0.7% decrease in the second quarter.  The third quarter gain partially reflects the end of labour disputes in the postal services.

Output of professional and administrative services decreased 0.2% in the quarter, following three consecutive quarterly gains.

 

 

 

 

LIST OF TABLES

Income and Expenditure Data

Quarterly Data, 2008:1-2011:3

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

Annual Data, 2007-2010

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, 2008:1-2011:3
Table 14: Annual Data, 2007-2010

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