Ontario’s economy will continue slow recovery, Central 1 Credit Union forecasts
Jobless rate will gradually decline, no sign of inflation
TORONTO, ONTATRIO (October 30, 2013) — The Ontario economy has been weaker than expected this year, but should gain momentum over the next five years, says a new forecast by Central 1 Credit Union.
“For 2013 I’ve lowered my forecast since June, but I expect an expanding U.S. economy will finally spur Ontario growth in 2014 and beyond,” said Helmut Pastrick, chief economist for Central 1, the trade association for 140 credit unions in Ontario and British Columbia.
Pastrick now expects Ontario to grow by 1.2 per cent this year, not the 1.4 per cent that he earlier projected. Growth will climb from less than two per cent in 2014 to above three per cent in 2017 and 2018. Key to this forecast is an upshift in U.S. economic growth and a lower Canadian dollar combining to lift exports.
Pastrick also forecasts business investment will pick up. However, the policy-induced slowdown in residential investment and cuts to government spending will drag down overall growth during the next five years.
Highlights of the forecast for 2013-2018:
— Economic slowdown to end in 2014
— Growth momentum builds, driven by faster U.S. growth
— Gradual improvement ahead in the labour market
— Unemployment rate drops to 4.5 per cent by 2018
— Housing market to benefit from faster income growth
Ontario’s unemployment rate is forecast to decline to 7.2 per cent in 2014 and to 4.5 per cent in 2018 as more and more baby boomers retire. The falling jobless rate will reverse the outflow of residents now headed to Western Canada for jobs.
“I expect the housing market to firm modestly in 2014 and to moderately gain momentum through 2018, despite rising mortgage rates,” Pastrick said. “I don’t see the Bank of Canada raising rates until early 2015.”
Pastrick expects the Canadian dollar to fall to about 93 cents U.S. over the next couple years, before rebounding somewhat in 2017-18.
A separate report provides a regional breakdown for the province. Toronto and Kitchener-Waterloo will continue to be the fastest growing areas. The technology sector will be able to absorb job losses caused by current problems at BlackBerry, according to Pastrick.
Spending restraint by both Ottawa and Queen’s Park will restrict growth in all regions. Challenges in auto manufacturing and high commodity prices will hurt growth in most areas.
The full report Ontario Economic Forecast 2013-2018 is available here. The regional report Ontario Regional Economic Outlooks is available here.
About Central 1
Central 1 is the central financial facility and trade association for the B.C. and Ontario credit union systems. Central 1 represents a consumer-oriented, full-service retail financial system that serves 3.2 million members and holds $88.7 billion in assets and is owned primarily by its member credit unions, 44 in B.C. and 96 in Ontario.
With offices in Vancouver, Mississauga, and Toronto, Central 1 provides liquidity management, direct banking and payment service solutions as well as a wide range of trade services. For more information, visit www.central1.com.