Executive Summary

The Global Economy

In 2016, growth in global output remained positive but subdued. Based on estimates by the International Monetary Fund (IMF)[1], global output was estimated to have increased by 3.1 per cent, the slowest growth in global output since 2008. Weaker growth in the large economies of the United States (US) and in China during the first half of the year was influential in the slower global growth observed. Growth picked up during the second half of the year and is expected to provide a positive foundation for stronger growth in 2017.

Forecasts for global growth over the next two years are positive. The IMF forecasts growth to pick up to about 3.4 per cent in 2017 and 3.6 per cent in 2018. While these represent an accelerated pace of growth relative to that observed in 2016, they remain below the pre-recession average annual growth of 4.0 per cent. Planned infrastructural expansion in the US and continued fiscal support in China are important elements of the growth forecast. However, risks have increased given the uncertainty around key US policies, including trade.

Canada and Ontario

The annual average growth in the Canadian economy, as measured by the change in real Gross Domestic Product (GDP) accelerated in 2016, up 1.4 per cent. This compared with a revised growth of 0.9 per cent registered in 2015. The growth attained in 2016 was driven by higher household consumption expenditure, which increased by 2.3 per cent in 2016, following a 1.9 per cent growth in 2015. The increase in household consumption expenditure continued to reflect a growing labour market which supported relatively strong growth in household disposable income. In an environment where interest rates remained at near historic lows, these factors provided the basis for the relatively strong growth in household consumption expenditure.

Also contributing to growth in 2016 were higher government consumption expenditure (2.0 per cent) and exports of goods and services (1.1 per cent). Meanwhile, a key constraint on GDP growth in 2016 was lower investment expenditure, which reflected weakness in the energy sector.

The higher consumption expenditure and higher energy prices were two inflation enhancing factors which prevailed in 2016. Reflecting mostly the increase in energy prices, the inflation rate edged up to 1.4 per cent, slightly higher than the 1.1 per cent inflation rate observed in the preceding year. However, at 1.4 per cent, the annual inflation rate remained relatively contained reflecting mainly the continuation of excess production capacity in the Canadian economy.

During the first three quarters of 2016, growth characterized changes in the GDP of Ontario, as reflected in quarterly GDP changes of 0.9 per cent, 0.2 per cent and 0.7 per cent respectively.   At annualized rates, these represented respective GDP growth rates of 3.5 per cent, 0.7 per cent and 2.6 per cent. Quarterly increases in the private consumption expenditure were the bedrock of the positive changes observed during the period. Positive GDP changes helped to influence an improvement in labour market conditions in Ontario in 2016, as reflected in a 1.1 per cent (76,400 positions) increase in net new jobs and a decline in the provincial unemployment rate to 6.5 per cent, down from 6.7 per cent in 2015.

Both the Canadian and Ontario economies are expected to continue to grow in 2017. For Canada, growth is expected to be around 1.9 per cent. A number of factors are likely to spur growth in 2017, including expected US economic expansion, increased international competitiveness due to the further depreciation in the Canadian currency in 2016, and a pick-up in investment in the resource sector as energy prices increase. The continuation of a very accommodative macroeconomic environment is also expected to contribute. These conditions are advantageous to the highly export oriented Ontario economy and as such, growth in Ontario is likely to remain a key source of the expected growth in the Canadian economy. The Ontario economy is expected to register growth of about 2.4 per cent in 2016.

Notwithstanding the continuation of growth in the Canadian and Ontario economies, the more inward looking and less open trade posture of the US is likely to be an important constraint on growth over the medium term.

The Region of Peel

Most of the key economic indicators in Peel continued to register positive changes in 2016, indicating sustained strengthening in Peel’s economy. At the broadest level, Peel’s population continued to grow.  Based on the 2016 census, in 2016, total population (without undercount) in Peel Region stood at 1.38 million persons, an increase of 6.8 per cent over the five year period 2011 – 2016. All three municipalities contributed to population growth over the period. Peel’s increasing population continued to support growth in its total taxable assessment base. In addition, Peel’s business sector remained strong at over 155,000 businesses, providing various services for its growing population.

In 2016, and for the second consecutive year, changes in Peel’s labour market were positive as more of Peel’s residents entered the labour market in search of work, many of whom were successful in finding jobs. These were reflected in respective increases of 4.5 per cent and 5.0 per cent in Peel’s total labour force and total employment; changes which underpinned a 0.4 percentage point reduction in Peel’s unemployment rate to an eight year low of 7.3 per cent in 2016. The observed labour market changes were likely contributors to a slower rate of growth (2.6 per cent) in Ontario Works (OW) caseloads in 2016 relative to that observed in 2015 (6.2 per cent).

Despite broad based positive changes in Peel, some indicators showed adverse changes in 2016. Peel’s OW caseloads continued to rise, although at a slower pace. In addition, building intentions as reflected by the total value of building permits issued, and actual building activities (housing starts) contracted.   Notwithstanding these short term growth interruptions, Peel remained on its long term growth path towards a Region of 1.77 million persons by 2031, 1.97 million persons by 2041 and 870,000 jobs by 2031.

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