TORONTO, ONTARIO--(Marketwired - Oct. 6, 2016) - Ontario's economy is anticipated to outperform the national average for a third straight year in 2016 as it benefits from U.S. demand, a weaker loonie and a robust housing market, according to the BMO Blue Book released today by BMO Capital Markets Economics and BMO Commercial Banking.
Much like the U.S. Federal Reserve's Beige Book, the BMO Blue Book combines the expertise of BMO's economists with information on current national and provincial business conditions provided to BMO's commercial bankers by local businesspeople.
"Real GDP is on track to expand 2.6% this year, and a still-solid 2.3% in 2017. Firm U.S. demand, a weaker currency, low oil prices and a strong housing market are all at work," said Robert Kavcic, Senior Economist, BMO Capital Markets.
Exports and manufacturing have been supported by the macroeconomic backdrop. "Real exports have risen above previous record levels seen before the recession in 2007, and the real trade balance is steadily improving, adding to economic growth. However, longer-term issues remain as relatively high labour costs continue to pose challenges for the auto sector versus Mexico and the Southern U.S.," stated Mr. Kavcic. "Indeed, while manufacturing has rebounded strongly earlier in the recovery, growth has softened in the past two years as firms have filled up production capacity, but have been shy to deploy new capital investment and hiring."
Meanwhile, Ontario's labour market is thriving, with employment up 1 per cent year-over-year through August. "The jobless rate is now trending below the national rate for the first time since 2006," said Mr. Kavcic.
The housing market continues to perform well -- particularly in Toronto, where resale prices are above average ranges and condo and townhouse demand is growing.
The provincial budget deficit is set to decline by $1.4 billion in FY16/17, marking a third straight year of reduction and weighing in at a manageable 0.7 per cent of GDP. "The Province continues to target FY17/18 for a balanced budget," stated Mr. Kavcic.
According to Victor Pellegrino, Senior Vice President, Eastern Ontario Division, BMO Bank of Montreal, the story for Eastern Ontario businesses has been consistently stable this past year. "We continue to see good momentum across sectors we support and predict continuous commercial growth given the provincial economy's strengthening. For instance, on the agriculture side, we continue to see growth in the dairy and crop industries, including a record crop in grain last year," Mr. Pellegrino said. "There is an uptick in farm consolidation, led by a 10 per cent increase in land value over the last three years."
He added, "We note a surge of movement in Ottawa as new, larger projects, such as the Light Rail Transit, the National Arts Centre and LeBreton Flats, leverage sturdy economic conditions and last year's federal election result to create new opportunities. We predict this business confidence will lead to more home purchases, renovations and retail sales, and subsequently benefit a number of trades and services."
"Southwestern Ontario businesses continue to expand, with a number of encouraging prospects on the horizon," reported Julie Barker-Merz, Senior Vice President, Southwestern Ontario Division, BMO Bank of Montreal. "While there's still uncertainty given commodity prices, the strength of economic growth and the impact of the U.S. election, our commercial customers continue to show cautious optimism."
The high-tech industry continues to accelerate in the Kitchener-Waterloo-Cambridge-London area and venture capital is on the rise.
In agriculture -- a key component of the regional economy -- David Blyth, Regional Vice President, Commercial Banking, Southwestern Ontario, BMO Bank of Montreal, sees a recess in capital spending and a trend toward diversifying and mitigating risk.
The Greater Toronto Area
"The Greater Toronto Area is large, diverse and a significant driver of both the provincial and national economies," said Steve Murphy, Senior Vice President, GTA Division, BMO Bank of Montreal. "With renewed economic strength visible in Ontario -- particularly in the area of infrastructure from a number of both new and traditional commercial enterprises -- there's a lot of excitement in the GTA's business community."
Mr. Murphy added BMO is here to help with a highly-skilled team of experts that can make lending decisions at the local level to help its commercial clients boost productivity, expand into new markets and make strategic investment decisions that will help propel growth and drive success.
The full BMO Blue Book can be downloaded at www.bmocm.com/economics.
About BMO Financial Group
Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of $699 billion as of January 31, 2016, and close to 47,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets.