RBC has revised its forecast for provincial real GDP growth to 1.3% in 2013, down from 1.7%.
TORONTO – After seeing encouraging signs earlier this year, Ontario’s economic momentum failed to pick up as expected in recent months, according to the latest RBC Economics Provincial Outlook. With little evidence strengthening activity so far this year, RBC has revised its forecast for provincial real GDP growth to 1.3% in 2013, down from a previously expected 1.7%. Still, RBC projects the pace of growth to accelerate in 2014.
“We continue to anticipate exports to be the prime source of economic growth in Ontario, even though we saw merchandise trade virtually stall in recent months,” said Craig Wright, senior vice-president and chief economist, RBC. “As the US economy recovers further, demand for Ontario’s exports will rise and contribute real GDP growth of 2.8% in 2014.”
The report notes that among the more positive economic developments in Ontario during the first half of 2013 were a resilient housing sector and strong consumer spending on big-ticket items. However, the lacklustre demand for provincial merchandise exports and manufacturing production has contributed to a notable drag on growth so far in 2013.
In the June Provincial Outlook, RBC expected auto plants and parts manufacturers in Ontario to ramp up production as demand and sales for light vehicles were up dramatically earlier in the year. RBC notes that motor vehicle production was down 7.9% in the first eight months of 2013 relative to the same period a year ago, indicating that Ontario is losing ground to other jurisdictions, including the US southern states and Mexico.
Exports of machinery, primary metals, industrial chemicals and paper fell year-over-year during the first half of 2013.