Ontario cities continue their road to recovery in 2015

A weaker Canadian dollar and solid US economy will continue to drive stronger manufacturing activity.

OTTAWA — Ontario cites continue their road to recovery, but the streak of modest growth will continue, according to The Conference Board of Canada’s Metropolitan Outlook: Summer 2015.

“Many Ontario mid-sized metropolitan economies are expected to benefit from a weaker Canadian dollar and a solid US economy, which will support stronger manufacturing activity,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada.

But he warned the strength of the manufacturing recovery will be limited by the failure of business investment to pick up in the face of capacity constraints, suggesting that overall economic growth will remain modest.

Kitchener-Cambridge-Waterloo will boast the fastest growing economy this year among the 15 cities covered in the report.

Aside from Kitchener-Cambridge-Waterloo and Oshawa, most Ontario cities covered in the report can expect growth in real gross domestic product (GDP) of between 1 and 2%.

The weaker Canadian dollar and a solid US economy are fostering a gradual recovery in many cities’ manufacturing sector this year.

Kitchener-Cambridge-Waterloo can boast the strongest economic outlook among the 15 cities covered in the report this year, with real GDP forecast to increase by 3.4 per cent. Work on a light-rail transit system will boost construction activity this year and next, while ongoing strength in the local manufacturing industry and the CMA’s track record of innovation is helping it weather significant plant closures and company downsizings. Overall job conditions in the area remain decent, with employment up 1.5% in 2014 and expected to increase 2.4% this year.

Oshawa’s outlook remains positive despite some headwinds in the local auto industry. In particular, demand for new housing is expected to remain robust, thanks to solid population growth as relatively affordable housing attracts residents from surrounding areas. On the non-residential side, work continues on the renovation and expansion of the Oshawa Centre. But with General Motors set to shift Camaro production to Michigan, manufacturing growth is expected to be modest at best. Overall, real GDP is forecast to advance by 2.6% in 2015, lifting employment by 1.2%.

London’s economy shook off several years of lethargy in 2014 as it grew by 1.8%. This year, real GDP is forecast to advance by 2.1%, its fastest increase since 2005, thanks to stronger manufacturing and construction output. The value of London building permits rose strongly over the winter, particularly for non-residential construction, so the Conference Board expects construction output to rise by 2.9% in 2015. With the improving economy, employment is expected to increase by 2.1% in 2015, adding close to 5,000 jobs to the area.

Windsor’s auto sector is benefiting from rising vehicle sales in the US as well as in Canada. In particular, the Windsor-built Chrysler Town & Country and Dodge Grand Caravan have been selling well south of the border. In addition, Fiat Chrysler Automobiles recently completed a $2-billion renovation of its Windsor assembly plant in preparation for the start of production on a new minivan model. All in all, local manufacturing output is forecast to expand by 2.8% this year. This, combined with strong construction activity, will support overall real GDP growth of 2% in Windsor this year. Local employment will also continue to climb, increasing by 3% in 2015.

An improving services sector will help lift St. Catharines–Niagara’s economy by 1.8% this year. In particular, a weaker Canadian dollar should result in more cross-border trips by Americans, providing a lift to the region’s key tourism industry. This, combined with solid employment and income gains, is expected to boost retail sales by 2.9% this year, and in turn will lift wholesale and retail trade output by 2.7%.

Real GDP growth in Kingston is forecast to improve but remain modest, accelerating from 0.8% in 2014 to 1.1% this year. The city’s construction sector is poised to rebound this year, as robust non-residential investment activity offsets declines in new home construction. Services sector activity is also set to improve, led by solid gains in business services, in wholesale and retail trade, and in transportation and warehousing.

Thunder Bay’s GDP will grow by 0.7% in 2015, down from 1.2% in 2014. Although construction activity is expected to pick up steam this year, this will be offset by declines in resources and utilities and in the public sector. The local construction sector is being fuelled by a number of medium-sized projects, including construction of Delta’s waterfront hotel and work on the historic Royal Edward Arms.

Low nickel prices and shelving of the Ring of Fire mining project will limit Sudbury’s GDP growth to 0.7% in 2015. This will keep the local job picture stagnant, with employment expected to advance by a tiny 0.5% this year. On the bright side, Sudbury’s construction sector will resume growth this year; it is forecast to expand by 1.8%, following declines in 2013 and 2014.

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