Greater Sudbury. Presented by the Credit Unions of Ontario, the Ontario Chamber of Commerce, and the Greater Sudbury Chamber of Commerce.

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1 2015 Economic Outlook Greater Sudbury Presented by the Credit Unions of Ontario, the Ontario Chamber of Commerce, and the Greater Sudbury Chamber of Commerce. 1 The unemployment rate in the Greater Sudbury CMA is expected to slide to 5.8 percent in 2016, well down from its recent peak of 9.3.percent in The Greater Sudbury Census Metropolitan Area (CMA) has 165,000 residents. It is Northeastern Ontario s main service and distribution hub. The city s major industries are healthsocial services, primary resources and retail-wholesale trade The industries contributing most to near-term economic growth are primary resource industries, retail-wholesale trade, health-social services and a variety of other service industries. Construction contributes only marginally to forecast growth. Economic output from education The fortunes of Greater Sudbury services and public administration will 2 Total employment for the Greater Sudbury CMA is forecast to remain steady in 2015 and edge up 0.5 percent in and the surrounding region are closely entwined with the outlook for global markets for primary products such as steel and metals. Although commodity prices are expected to rise from current lows, economic growth will remain sluggish in the decline slightly in the near term. New capacity has contributed to increased gold production in Northeastern Ontario. For the province as a whole, gold production was up 27.8 percent in the first 10 3 Average housing prices are edging up slowly in the Greater Sudbury CMA, and are projected to reach an average price of $256,000 by 2016 near term as producers respond cautiously and the population in the region continues to shrink. In the meantime, labour markets and consumer spending are projected to remain weak as government investment and regional population growth essentially stall over the months of last year. Production of other minerals has been mixed. Moving forward, the mining sector will be supported by the outlook for moderate improvement in commodity prices. Nickel, zinc and lead prices are expected to move higher over the next two years, with forecast period. copper prices following in 2016 as the U.S. economy picks up steam and Modest job growth, however, is the global economic recovery slowly expected to return after this year, takes hold. with government services, retailwholesale trade and manufacturing The recent opening of Vale Canada s each contributing. With employment Totten Mine is expected to sustain expected to grow somewhat more 200 jobs. Meanwhile, Glencore is quickly than the labour force, the expected to spend up to $400 unemployment rate in the Greater million to make modifications to its Sudbury CMA is forecast to decline to Falconbridge smelter, something that 5.8 percent by 2016 from 6.2 percent bodes well for the economy. in The investment outlook is mixed. Private-sector investment in non Economic Outlook: Greater Sudbury CMA 1

2 residential building construction is forecast to decline in 2015 while public-sector investment in non-residential building construction remains stalled. Commercial building construction in the Greater Sudbury CMA jumped last year and is expected to fall back to historical levels in 2015 and Market conditions are not conducive to a sustained marketwide investment upturn and more dependent on project-specific investments, including the planned construction of a 60,000-square-foot retail centre. Housing market activity generally tracks local economic and population trends as well as broader factors such as mortgage rates. Even though mortgage rates were at record lows last year, sales declined an estimated 6.6 percent and marked the third consecutive annual decline. Net out-migration and minimal employment growth since the recession are negative local demand factors overriding the positive effect of low rates. Given the outlook for these key local factors, no significant departure from recent trends is expected. Rangebound housing sales and prices are expected over the forecast period. Sales are forecast to slide lower in 2015 and rebound slightly in The average sale price will edge up by 1.2 percent in both 2015 and 2016, outperforming the rest of Northeastern Ontario. Residential construction tracks housing sales and is likely to remain rangebound at a slightly lower level rising modestly through 2016 supported more by the replacement of older housing stock rather than new household formation. The higher rental vacancy rate in Great Sudbury will result in fewer rental apartment starts. Residential permits issued declined an estimated 13.8 percent last year. Total employment is forecast to remain steady in 2015 and edge up 0.5 percent in The unemployment rate will edge lower as employment growth exceeds growth in the labour force due to aging demographics and out-migration. The unemployment rate in the Greater Sudbury CMA is expected to slide to 5.8 percent in 2016, well down from its recent peak of 9.3 percent in Read on to find out how Greater Sudbury s broader economic region stacks up against the rest of Ontario >>> Census METROPOLITAN AREA OUTLOOK Greater Sudbury Total Employment (000s) % change Unemployment Rate MLS Residential Sales* 2,478 2,308 2,156 2,100 2,150 % change MLS Residential Average Price* 240, , , , ,000 % change Residential Permits (units) % change Non-Residential Permits ($ millions) % change Population (000s) % change Source: Statistics Canada, CREA, Central 1 Credit Union forecasts. *Approximated with data from the Sudbury Real Estate Board Economic Outlook: Greater Sudbury CMA 2

3 2015 Regional Economic Outlook Summary of Ontario Summary Canadian dollar, and cost savings by External factors are setting the stage consumers and businesses, from lower for a better performing Ontario oil prices, notably in transportation, economy and its regional economies. will push up the province s real GDP 1 Improving external conditions support higher provincial growth. The expected improvement is broadly based across industries and regions, though some manufacturers will experience negative fallout from the decline in exports to oil-producing growth to 2.7 percent in each of the next two years. This compares to an estimated 1.9 percent in 2014 and 1.3 percent actual in provinces. Overall, Ontario is a net The global economic recovery 2 Regional economies boosted by varying degrees. beneficiary of low oil prices and, when combined with other drivers such as the lower Canadian dollar remains uneven and slow, with weakness in Europe, slowing growth in China, recession in Brazil and and faster U.S. economic growth, Russia, and sluggish commodity- 3 Narrowing regional growth disparities. economic prospects are improving. Regional economies in southwestern based economies offset by firmer growth in the U.S. and U.K. The collapse in oil prices has mixed and central Ontario are well- impacts which will contribute to lower positioned to benefit from the headline inflation in many countries expected improvement in and prompt some central banks to manufacturing, agriculture, and ease or postpone tightening. However, tourism. Business investment gains low energy prices will support global appear later in the forecast. Domestic economic growth by reallocating economic activity, for example in some energy-related savings to housing, will also firm up in most spending on non-energy goods and regions and will be aided by higher services. Oil-producing economies will population growth. Northern regions, bear the brunt of this price collapse which are heavily dependent on and will drag down overall economic mining, face less optimistic prospects. growth. On balance, however, global growth should receive a lift. Favourable external conditions for Canada s economic growth will Ontario s economy be negatively affected by the oil Ontario stands to benefit from price collapse, and depending external forces more than at any time on where oil prices settle and on in the past 10 years. The combination how long prices remain low, the of higher U.S. growth, the lower impact on real GDP growth could 2015 Economic Outlook: Greater Sudbury CMA 3

4 be 0.5 percent in This will cause the Bank of Canada to hold off on a rate increase until the first quarter of 2016 and possibly later. With the U.S. Fed poised for its first rate increase around mid-2015, the narrowing interest rate differential, along with the widening growth differential, will put downward pressure on the Canadian dollar. reduced oil-related costs, the lower loonie, ongoing low interest rates, and improved provincial growth will benefit all regions, though initial conditions and industry-specifics will contribute to some growth differences. The improved growth backdrop will take time for its benefits to work through the economy with growth gaining momentum through Interprovincial migration flows will reflect the changing economic circumstances between the oil-producing regions of the country and the rest of Canada. Ontario s net interprovincial outflow to Alberta of about 15,000 persons annually will decline and turn into a net inflow, providing a small lift to the province s population growth rate. There are negative impacts from the oil price collapse that will ripple through Ontario s economy. Less capital expenditure by oil companies will mean less demand for machinery, equipment, fabricated metal products, professionaltechnical services, and financing from Ontario firms. Job layoffs in the oil patch will translate directly to lower income for commuting workers from Ontario. Lower government revenue from these sources is another negative. Gauging the net positives and negatives from lower oil prices depends on how low prices will fall and for how long. Current thinking is that it is a net positive for Ontario and other oil-importing provinces. The housing market will hold up and post further gains under improving economic and population growth, low interest rates, and pent-up demand in some of the province s regions. Markets in the manufacturing regions stand to gain the most given their modest recovery since the recession. Manufacturing-oriented economies outside of the Toronto and Kitchener-Waterloo-Barrie regions are beginning to see gains and are poised for faster growth. The composition of manufacturing activities in a region will make a difference as well, but a general improvement is likely in most types of manufacturing. Southwestern regions and the Hamilton-Niagara region are favourably positioned and also have the added advantage of robust agricultural and, in some cases, tourism sectors. Northern regions will continue to lag because of their large dependence on the mining sector, which faces weak prices and export prospects as long as slow growth persists in emerging markets such as China. However, the wood products sector faces better prospects from rising U.S. housing starts. One trend not expected to change soon is the dominance of a metropolitan area in a region relative to rural centres. In some regions, economic and population trends are considerably less positive in those rural areas than in the larger, more industry-diversified metro area, which is usually a region s service and distribution hub. Regional growth rotation Ontario s regional economies are quite diverse in their industry makeup though some dominant aspects exist in several of them. Higher U.S. growth, 2015 Economic Outlook: Greater Sudbury CMA 4

5 LABOUR FORCE Regional Economic Outlook Hamilton-Niagara Peninsula % change Kingston-Pembroke % change Kitchener-Waterloo-Barrie % change London % change Muskoka-Kawarthas % change Northeast * % change Northwest % change Ottawa % change Stratford-Bruce Peninsula % change Toronto 3, , , , ,665.0 % change Windsor-Sarnia % change Ontario 7, , , , ,633.0 % change Economic Outlook: Greater Sudbury CMA 5

6 Employment Regional Economic Outlook Hamilton-Niagara Peninsula % change Kingston-Pembroke % change Kitchener-Waterloo-Barrie % change London % change Muskoka-Kawarthas % change Northeast* % change Northwest % change Ottawa % change Stratford-Bruce Peninsula % change Toronto 3, , , , ,392.0 % change Windsor-Sarnia % change Ontario 6, , , , ,137.7 % change Economic Outlook: Greater Sudbury CMA 6

7 Unemployment Rate Regional Economic Outlook Hamilton-Niagara Peninsula Kingston-Pembroke Kitchener-Waterloo-Barrie London Muskoka-Kawarthas Northeast* Northwest Ottawa Stratford-Bruce Peninsula Toronto Windsor-Sarnia Ontario Economic Outlook: Greater Sudbury CMA 7

8 Regional Economic Outlook NON-RESIDENTIAL BUILDING PERMITS Hamilton-Niagara Peninsula 1,491 1, % change Kingston-Pembroke % change Kitchener-Waterloo-Barrie , ,100 % change London % change Muskoka-Kawarthas % change Northeast* % change Northwest % change Ottawa 1,284 1,179 1,200 1,100 1,220 % change Stratford-Bruce Peninsula % change Toronto 5,995 6,193 6,200 6,650 7,000 % change Windsor-Sarnia % change Ontario 12,166 11,666 12,022 11,720 12,560 % change Economic Outlook: Greater Sudbury CMA 8

9 Regional Economic Outlook RESIDENTIAL BUILDING PERMITS Hamilton-Niagara Peninsula 5,416 4,975 5,000 5,300 5,700 % change Kingston-Pembroke 1,928 2,050 1,850 1,850 2,000 % change Kitchener-Waterloo-Barrie 6,325 7,084 7,900 7,500 7,900 % change London 3,121 2,971 2,875 3,000 3,300 % change Muskoka-Kawarthas 1,737 1,819 2,100 2,150 2,260 % change Northeast* 1,484 1,305 1,100 1,000 1,000 % change Northwest % change Ottawa 8,211 6,643 8,950 7,800 8,000 % change Stratford-Bruce Peninsula 1,079 1,088 1,050 1,075 1,125 % change Toronto 38,841 40,256 35,000 36,500 38,500 % change Windsor-Sarnia 1,313 1,492 1,425 1,500 1,600 % change Ontario 69,884 70,133 67,640 68,075 71,810 % change Economic Outlook: Greater Sudbury CMA 9

10 MLS Residential Sales Regional Economic Outlook Hamilton-Niagara Peninsula 20,572 21,048 22,274 23,000 24,000 % change Kingston-Pembroke 7,685 7,272 7,095 7,200 7,350 % change Kitchener-Waterloo-Barrie 19,977 20,706 21,101 22,000 23,000 % change London 9,787 9,783 10,405 10,800 11,200 % change Muskoka-Kawarthas 8,439 8,573 9,054 9,300 9,600 % change Northeast* 6,515 6,167 5,842 5,750 5,700 % change Northwest 2,056 2,053 2,264 2,300 2,375 % change Ottawa 17,184 16,539 16,472 16,750 17,400 % change Stratford-Bruce Peninsula 3,806 3,700 4,017 4,200 4,350 % change Toronto 93,765 94,588 99, , ,800 % change Windsor-Sarnia 7,834 8,110 8,255 8,500 8,800 % change Ontario 197, , , , ,575 % change Economic Outlook: Greater Sudbury CMA 10

11 Regional Economic Outlook MLS RESIDENTIAL AVERAGE SALE PRICE Hamilton-Niagara Peninsula 314, , , , ,000 % change Kingston-Pembroke 240, , , , ,000 % change Kitchener-Waterloo-Barrie 301, , , , ,000 % change London 237, , , , ,000 % change Muskoka-Kawarthas 292, , , , ,000 % change Northeast* 209, , , , ,000 % change Northwest 182, , , , ,500 % change Ottawa 327, , , , ,000 % change Stratford-Bruce Peninsula 219, , , , ,000 % change Toronto 504, , , , ,500 % change Windsor-Sarnia 172, , , , ,000 % change Ontario 384, , , , ,858 % change Economic Outlook: Greater Sudbury CMA 11

12 POPULATION Regional Economic Outlook Hamilton-Niagara Peninsula 1, , , , ,465.5 % change Kingston-Pembroke % change Kitchener-Waterloo-Barrie 1, , , , ,325.0 % change London % change Muskoka-Kawarthas % change Northeast* % change Northwest % change Ottawa 1, , , , ,342.0 % change Stratford-Bruce Peninsula % change Toronto 6, , , , ,535.0 % change Windsor-Sarnia % change Ontario 13, , , , ,933.1 % change Disclaimer: Economic Outlook: Greater Sudbury (the Analysis ) may have forward-looking statements about the future economic growth of the Province of Ontario and its regions. These statements are subject to risk and uncertainty. Actual results may differ due to a variety of factors, including regulatory or legislative developments, competition, technological change, global capital market activity and general economic conditions in Canada, North America or internationally. This list is not exhaustive of the factors that may affect any of the Analysis forward-looking statements, and all factors should be considered carefully by readers and readers should not place undue reliance on the Analysis forward-looking statements. The information contained in this Analysis ( Content ) does not constitute professional advice, and should not be relied upon as accurate, reliable, complete, timely or fit for any particular purpose without receiving appropriate and qualified professional advice. The Content is provided on an as is basis, without any representations, warranties, conditions or guarantees, whether express or implied, including any representations, warranties, conditions or guarantees as to the accuracy, reliability, completeness, currency, fitness for a particular purpose and non-infringement, all of which are hereby disclaimed by Central 1 Credit Union, the Ontario Chamber of Commerce, and all of the credit unions of Ontario and all the chambers of commerce and boards of trade in Ontario to the fullest extent permitted by law. Central 1 Credit Union, the Ontario Chamber of Commerce, and all of the credit unions of Ontario and all the chambers of commerce and boards of trade in Ontario and their respective directors, officers, employees and agents will not under any circumstances be liable for any loss or damage in connection with the use of the Content. Readers use of the Content is at their own risk Economic Outlook: Greater Sudbury CMA 12