Thursday, January 01, 2009

RBC reports that it's certain that Ontario will slip into recession

RBC is reporting that the Ontario economy is slipping into a recession. There seems to be no doubt about it as we are rounding the corner into another year.

See what they say about the Ontario contractions below, interesting!


Ontario — Slipping into recession

Hopes of escaping the recession vortex are disappearing fast in Ontario. Earlier

strength in the domestic economy is diminishing as consumer and business

sentiment sours and is no longer able to offset the drag from the struggling

external trade sector that is being exacerbated by the worsening of conditions

south of the border. Ontario's economy is now forecast to contract by 0.2% in

2008 and 1.4% in 2009 (revised lower from zero and 0.4%, respectively), which

would represent the worst performance since the early 1990s recession. Moreover,

downside risks will remain significant in the face of the tremendous uncertainty

surrounding its key auto industry and persistent recession in U.S. housing.

While we are assuming further declines in motor vehicle production in the

province, the outcome of the drama enveloping the "Detroit Three" automakers

is unknown and could have more serious repercussions than currently anticipated.

Ontario is among the North American jurisdictions with the most at stake

in the rescue negotiations between these companies and the U.S. and Canadian


The latest employment data unequivocally show that job prospects in the province

are quickly deteriorating. Although the record 66,000 job loss in November

likely exaggerates the weakness, we expect employment to decline in 2009 (by

0.9%) for the first time since 1992. Accordingly, Ontario's unemployment rate is

forecast to climb to an average of 8.3% from 6.5% in 2008. As concerns about the

economy and job prospects mount, households will be more cautious in their

spending. This will slow growth in retail sales and cut into demand for housing.

Housing starts in 2009 are forecast to drop to their lowest level in 10 years in the


In 2010, Ontario economy's will benefit from strengthening U.S. demand as

forceful fiscal and monetary stimulus succeed in setting the U.S. economy onto

a recovery course. Similar factors will also boost demand on this side of the

border. These factors will contribute to returning Ontario's real GDP into positive

growth territory, forecast at 2.5%.

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