Regional Economic Outlook

Transcription

1 2015 Regional Economic Outlook Northeast Region Presented by the Credit Unions of Ontario and the Ontario Chamber of Commerce 1 With employment expected to grow somewhat more quickly than the labour force, the unemployment rate is forecast to decline to 6.2 percent by 2016 from 6.8 percent in The Northeast Economic Region economic region (ER) covers Greater Sudbury and the districts of Nipissing, Parry Sound, Manitoulin, Sudbury, Timiskaming, Cochrane and Algoma and is home to over 560,000 residents. The region s key industries are mining, forestry, and utilities. The Greater Sudbury CMA has 165,000 residents and is the region s main with government services, retailwholesale trade and manufacturing each contributing. With employment expected to grow somewhat more quickly than the labour force, the unemployment rate is forecast to decline to 6.2 percent by 2016 from 6.8 percent in The biggest contributors to near- 2 Northeast Ontario s unemployment rate (6.8 percent) remains below the provincial average (7.3 percent) and is forecast to continue to drop. service and distribution hub. The city s major industries are healthsocial services, primary resources and retail-wholesale trade. The fortunes of the Northeast ER are closely entwined with the outlook for global markets for primary products 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 services and public administration will such as pulp, lumber, steel and decline slightly in the near term. 3 Government services, retailwholesale trade and manufacturing will all contribute to economic growth. metals. In particular, the downsizing of the region s forest sector has had a profound impact on many communities over the past decade, contributing to the migration of people from the region to other parts New capacity has contributed to increased gold production in the Northeast ER. For the province as a whole, gold production was up 27.8 percent in the first 10 months of last of Canada. Although commodity year. Production of other minerals prices are expected to rise from has been mixed. Moving forward, current lows, economic growth will the mining sector will be supported remain sluggish in the near term as by the outlook for moderate producers respond cautiously and the improvement in commodity prices. population in the region continues Nickel, zinc, and lead prices are to shrink. In the meantime, labour expected to move higher over the markets and consumer spending next two years, with copper prices are projected to remain weak as following in 2016 as the U.S. economy government investment and regional picks up steam and the global population growth essentially stall economic recovery slowly takes hold. over the forecast period. A strengthening U.S. economy and Modest job growth, however, is a rebound in housing markets would expected to return after this year, normally bode well for the forest 2015 Regional Economic Outlook: Northeast Economic Region 1

2 products industry. The benefit of such to date, however, has largely eluded the industry in Ontario with wood products shipments trailing that from other parts of Canada. To capitalize on increasing demand, forest products firms in the Northeast region, along with the provincial government, will need to address the competitiveness challenges posed by rising electricity rates and aging facilities. Reduced activity in Canada s oil and gas sector, as a result of the sharp drop in oil prices in recent months, will weigh against the steel industry in Sault Ste. Marie as oil producers scale back their investments and pipeline construction gets deferred or possibly cancelled. Oil prices are expected to remain weak until producers address the current glut in supply. In response to this weakness, Tenaris Algoma Tubes, a major tube producer, temporarily laid off about a quarter of its workforce in early January. The investment outlook is mixed. Private-sector investment in non-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 market-wide investment upturn and more dependent on project-specific investments. A number of major projects in the region will contribute to other investment spending and employment over the forecast period. Construction continues on the 25 megawatt New Post Creek hydroelectric development. As well, the development and conversion of the Energy East Pipeline, which cuts across the Northeast ER, may begin in 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 five 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. Regional sales are forecast to slide lower in 2015 and in 2016 following a 5.3 percent decline in The average sale price will remain near current levels. Housing markets are local in nature and some variances from the regional forecast will play out. The housing market in North Bay is likely to remain weak, while stronger price growth in Parry Sound is expected. The increase in the average sale price in the Sudbury CMA will be a little higher than the regional forecast at 1.2 percent in 2015 and 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 Greater Sudbury will result in fewer rental apartment starts. Residential permits issued declined an estimated 15.7 percent last year. Total employment is forecast to remain steady in 2015 and edge up 0.2 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 regional unemployment rate is expected to slide to 6.2 percent by in 2016, well down from its recent peak of 8.9 percent in The unemployment rate in the Greater Sudbury CMA is predicted to decline to 5.8 percent over the same period. Read on to find out how the Northeast economic region stacks up against the rest of Ontario >>> 2015 Regional Economic Outlook: Northeast Economic Region 2

3 Regional Economic Outlook Northeast Labour Force (000s) % change Total Employment (000s) % change Unemployment Rate MLS Residential Sales 6,515 6,167 5,842 5,750 5,700 % change MLS Residential Average Price 209, , , , ,000 % change Residential Permits (units) 1,484 1,305 1,100 1,000 1,000 % change Non-Residential Permits ($ millions) % change Private Non-Residential Building Permits ($ millions) % change Public Non-Residential Building Permits ($ millions) % change Population (000s) % change Net Migration ,517-1,000-1,000-1,000 Net International Net Interprovincial , Net Intraprovincial Source: Statistics Canada, CREA, Central 1 Credit Union forecasts. Notes: Housing sales and prices represent combined activity in real estate boards within the region Regional Economic Outlook: Northeast Economic Region 3

4 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. Read on to find out how the Northeast economic region stacks up against the rest of Ontario >>> 2015 Regional Economic Outlook: Northeast Economic Region 4

5 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 Regional Economic Outlook: Northeast Economic Region 5

6 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 Regional Economic Outlook: Northeast Economic Region 6

7 LABOUR FORCE (000s) 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 Source: Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 7

8 Employment (000s) 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 Source: Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 8

9 Regional Economic Outlook Unemployment Rate (%) Hamilton-Niagara Peninsula Kingston-Pembroke Kitchener-Waterloo-Barrie London Muskoka-Kawarthas Northeast Northwest Ottawa Stratford-Bruce Peninsula Toronto Windsor-Sarnia Ontario Source: Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 9

10 Regional Economic Outlook NON-RESIDENTIAL BUILDING PERMITS ($ millions) 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 Source: Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 10

11 Regional Economic Outlook RESIDENTIAL BUILDING PERMITS (units) 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 Source: Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 11

12 Regional Economic Outlook MLS Residential Sales (units) 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 Source: CREA, Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 12

13 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 Source: CREA, Statistics Canada, Central 1 Credit Union forecasts Regional Economic Outlook: Northeast Economic Region 13

14 POPULATION (000s) 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 Source: Statistics Canada, Central 1 Credit Union forecasts. Disclaimer Regional Economic Outlook: Northeast Economic Region (the Outlook ) 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 Economic Analysis of Ontario ( 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 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 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 Regional Economic Outlook: Northeast Economic Region 14