Ontario economy posts modest third-quarter growth boosted by lag in loonie

Growth is double rate of previous three months, as declining dollar makes Canadian goods cheaper on world markets.

Thestar.com
Jan. 15, 2016
By Rob Ferguson

A surge in exports fuelled by the lagging loonie helped Ontario notch modest growth of 0.9 per cent in the third quarter of 2015 - double the pace of the previous three months, Ministry of Finance figures show.

The three per cent growth in exports from July to September was the biggest since 2013 thanks to a sliding dollar that continues to make Canadian goods cheaper on world markets.

“In an increasingly competitive and challenging global market, Ontario’s economy continues to grow well,” Finance Minister Charles Sousa said in a statement Friday.

While the quarterly growth in gross domestic product was equivalent to an annual rate of 3.5 per cent, Sousa warned earlier this week that Ontario’s economy is expected to see two per cent growth this year.

Still, that could be enough to lead the provinces, as a crash in oil and other commodity prices, which is pulling the dollar down, has left Ontario as one of the country’s strongest economies as manufacturers benefit from currency weakness.

“Private-sector economists are forecasting that Ontario’s growth will continue to outpace the nation over the next two years,” added Sousa.

Manufacturing rose 2.8 per cent in the July-to-September period, after falling 0.3 per cent in the previous quarter, with the strongest gains in wood products and furniture and transportation equipment, including auto parts.

The food, beverage and tobacco sector and plastic and rubber products grew to a lesser degree.

Household spending increased 0.7 per cent thanks mainly to higher automobile sales, while residential construction, spending on machinery and equipment were down.

The figures came days after Sousa launched public consultations on his spring budget and acknowledged that tax revenues are lagging, but insisted the government remains on track to eliminate a $7.5-billion deficit within two years.

Progressive Conservative MPP Vic Fedeli (Nipissing) said the government shouldn’t get too cocky over the export growth, which was up just 0.2 per cent in the second quarter last year.

“The rise in exports is most certainly tied to our lower dollar, and nothing that this government has done. It makes you wonder where we could be in Ontario if we had sound fiscal management, competitive hydro rates and less red tape,” said Fedeli, his party’s finance critic.

The NDP said half a million Ontarians are looking for work, making it crucial for the Liberal government to take stronger action to boost growth.

“Families across this province are worried ... that they can’t find the kinds of good jobs that are the foundation of a stable future,” said New Democrat MPP and finance critic Catherine Fife (Kitchener-Waterloo).

Ontario was the country’s biggest job-creator in December, lowering the provincial unemployment rate to 6.7 per cent, the lowest since the pre-recession days of 2008. The national jobless rate held steady at 7.1 per cent.

TD Bank economist Brian DePratto wrote in a note to clients Friday that Canada will continue an “economic adjustment” as oil and commodities fall and conditions point to growth in manufacturing, services and exports.

“These types of adjustments do not happen overnight, but take place over the course of years. Growth is likely to be weaker as a result, and headline national numbers will likely mask what are very different regional and sectoral outlooks.”