2019 year in review and 2020 outlook · 2020 outlook: canadian and provincial economies expected to...

2019 Year in Review

and 2020 Outlook

PEEL’S ECONOMIC PULSE

1

Global Review and 2020 Outlook ........................................................................................... 2

National and Provincial Review and 2020 Outlook ................................................................. 3

Peel’s Economic Highlights 2019 ............................................................................................ 5

Peel’s Economic Review and 2020 Outlook ............................................................................ 6

Labour Market ........................................................................................................... 7

Ontario Works Caseloads……………………………………………………………………………………………9

Business Sector ........................................................................................................ 10

Manufacturing Sector .............................................................................................. 12

Construction Sector.................................................................................................. 13

Residential Resale Market ........................................................................................ 15

2020 Economic Outlook……………………………………………………………………………………………………….17

Table of Contents

2

Slow down in annual global growth in 2019 to be followed by a recession in 2020

The rapidly changing macroeconomic environment continued into 2019. After nine years of sustained

growth averaging 3.7 per cent annually, global growth slowed to 2.9 per cent in 2019, mainly due to:

• U.S. - China trade tensions, that negatively affected global trade and constrained growth in international trade; and

• Geopolitical uncertainties, including BREXIT.

I

2020 Global Economic Outlook: Longest growth phase of a US business cycle ends

The outbreak of the COVID-19 pandemic in December 2019 and the resulting economic

shutdown led to severe negative shocks globally.

For the first time in ten years, global growth is expected to be negative as the global economy enters a recession.

Labour market indicators are expected to deteriorate throughout 2020.

New US and Canadian financial market lows are comparable to The Great Depression.

Governments of most developed economies, including Canada, are providing fiscal and monetary stimulus to cushion negative impacts of an economic recession.

SLOWER GLOBAL GROWTH IN THE LONGEST

EXPANSION PHASE OF THE BUSINESS CYCLE

HEIGHTENED THE RISK OF AN ECONOMIC

DOWNTURN

3.8%

2017

3.6%

2018

2.9%

2019

SLOWER GROWTH IN GLOBAL

OUTPUT

2019 Global Economic Review & 2020 Outlook

Source: Statistics Canada Source: International Monetary Fund

3

Stable Canadian and provincial economic environment in 2019 followed by a COVID-

19 induced downturn in 2020

• Stable price environment supported growth

Bank of Canada Overnight Interest Rate unchanged at 1.75%

Low inflation Rate of 1.9% in 2019

Employment increased: Canada: 1.7%, Ontario: 3.3%

Near historic low unemployment rates

• Near full employment in Canada and slower growth in global trade and output constrained growth in Canada and Ontario

National and Provincial Economic Growth Continued, But Slowed

2020 Outlook: Canadian and provincial economies expected to be in recession

• Based on current forecasts, the Canadian economy entered a recession in the first

quarter of 2020. GDP is expected to decline by approximately 7.0 per cent for the full

year 2020.

• The national and provincial annual unemployment rate is projected to rise in 2020. In

March 2020:

o Employment declined by 5.3 per cent;

o The monthly unemployment rate increased by 2.2 points to 7.8 per cent; and

o 644, 000 persons exited the labour force.

• Bank of Canada’s overnight interest rate was lowered to a historic low of 0.25 per cent

in March 2020, to provide economic support to Canadian residents and businesses.

• Strong labour market performance

2019 National Economic Review & 2020 Outlook

Source: Statistics Canada

4

Higher Canadian Household Debt-to-Disposable

Income Ratio

159.9 164.4 175.9 176.1

2010 Q4

2019 Q4

2018 Q4

2014 Q4


2020 Outlook: Public debt to climb to multi-decade highs

In response to the COVID-19 pandemic, the government has unveiled a series of expenditure

measures designed to support vulnerable individuals and businesses throughout the pandemic.

The Federal Fiscal Stimulus is valued at approximately $265 billion or 11 per cent of GDP.

Provincial support is estimated at $17 billion. Increased government spending will:

• Support the health of Canadians

• Provide financial support to businesses and individuals

• Support the economy

The federal debt-to-GDP ratio is expected to reach its highest level in almost two decades.

• The Parliamentary Budget Office’s (PBO) fiscal scenario puts the federal government debt-

to-GDP ratio for 2020-21 to 41.4 per cent (Parliamentary Budget 0fficer, April 2020).

Notwithstanding short-term benefits, the increase in federal and provincial deficits heightens

risk for future municipal funding and increases the probability of higher taxation in the long-

term.

• Low interest rate environment led to elevated

levels of household debt. Canadian households

now owe $1.76 for every $1.00 of disposable

income earned.

• The provincial debt-to-GDP ratio increased to

40.0 per cent in 2019/20, while the ratio for the

federal government remained relatively flat at

just above 30 per cent.

2019 National Economic Review & 2020 Outlook

Lower interest rates led to increased borrowing and higher debt levels


5

2020 Outlook: COVID-19 to interrupt growth in Peel

• The onset of the COVID-19 pandemic and associated shutdown is expected to result in a

significant economic slowdown in Peel (and other Canadian municipalities) in 2020.

• As businesses cease or reduce operations to contain the virus, business activities are

expected to decline, and the number of business bankruptcies are likely to increase.

• One of the greatest impacts of COVID-19 will be on Peel’s labour market as residents exit

the labour market and rely on federal and provincial government supports.

Part of the vibrant GTA economic hub

Close to the large US market

Developed transportation

network

Diverse economic base

Peel’s growing labour market continued to strengthen in 2019


177,222

Business

Establishments

1%

2.9 million

persons 1.5 million 1.1 million

697,355 596,370

City of

Toronto

Peel

Region

York

Region

Durham

Region

Halton

Region

Vibrant business sector continues to

expand while bankruptcies decline

Peel’s Population: up by 0.7 per cent in 2019

49

Business

Bankruptcies

1%

Peel entered the COVID-19 pandemic with a strong and growing economy

2019 Peel’s Economic Review & 2020 Outlook

6

In 2019, population1 increased by 0.7% in Peel Region, with growth in all three municipalities

1 The number of people that usually live in an area.

• Peel’s total taxable assessment base

grew by 0.92 per cent in 2019, the

lowest growth in over two decades.

• This was due to several factors

including the successful assessment

review board (ARB) appeals, and

slower residential growth associated

with more stringent market conditions.

2018

Million

persons

Forecast

2041 1.49 1.97

2019

Million

persons

2020 OUTLOOK: Population growth to be impacted by the halt in immigration

• Growth in Peel’s population is primarily driven by immigration. The halt in immigration due to COVID-19 is expected to result in a substantial slowing in Peel’s population growth in 2020.

• Over the medium to long term, population growth is expected to return to its pre-pandemic

trend as Peel grows towards its planned population of approximately 2 million persons by

2041.

• Peel’s taxable assessment base is expected to continue to grow, although at a slower rate of

change, given the large tax base and the changing nature of work, which is likely to intensify

in the future and further the shift in Peel’s tax base towards the residential sector.

1.50

Source: Municipal Property Assessment Corporation

2019 Peel’s Population Review & 2020 Outlook Peel’s many strategic advantages continue to support growth

7

2019 Labour Market Review & 2020 Outlook

Participation Rate Employment Rate (Per cent) (Per cent)

2018 66.9 62.4

2019 68.7 64.2 For Adults (15 years and over)


2019 marked the fifth consecutive year of positive changes in both labour force and employment in Peel’s labour market

• As labour market conditions improved, a greater proportion of Peel residents were in the

labour market, working and looking for work, resulting in higher participation and employment

rates.

Labour Force

Persons willing,

able and available

to work

+ 3.9 per cent

Employed

Labour Force

Persons who are

working

+ 4.1 per cent

A growing Peel Region and positive changes in the national and provincial labour markets in 2019 influenced similar changes in Peel’s labour market

8

2019 marked the lowest annual average unemployment rate in Peel in six years

2020 OUTLOOK: COVID-induced worsening of Peel’s labour market indicators

• In the first quarter of 2020, Peel’s average quarterly employment declined, and many Peel residents left the labour market in response to the COVID-19 induced economic shutdown.

• Those who left the labour market were not counted as unemployed and as a result, Peel’s quarterly average overall unemployment rate fell to 6.0 per cent in the first quarter of 2020, from 7.9 per cent during the same time period last year.

• If the residents who exited the labour market were counted as unemployed, Peel’s quarterly average unemployment rate in the first quarter of 2020 would have been 8.7 per cent.

• Labour market conditions are expected to worsen in upcoming quarters.

• For 2020, the overall average annual employment in Peel is expected to decline and Peel’s average annual unemployment rate is expected to increase.


7.7 7.3 6.9 6.8 6.6

6.1 5.85.2 5.6 5.3

16.916.1 15.7

13.113.9

0

5

10

15

20

2015 2016 2017 2018 2019

Per c

ent

Annual Unemployment Rates

Overall (15 years and above) Adult (25 years and over) Youth (15 - 24 years)

• Employment in the service industries increased by

4.4 per cent, whereas that in the goods-producing

industries only increased by 2.7 per cent to extend

the long-term shift in employment towards the

service sector.

• Part-time and temporary employment fell and

accounted for lower shares of employment in 2019.


2019 Labour Market Review & 2020 Outlook

9

17,045 16,790 18,755 19,081 18,574 18,103

2019 2014 2015 2016 2017 2018

Source: Human Services, Peel Region

Source: Human Services, Peel Region

2020 OUTLOOK: Demand for social services to increase in the medium-term

• Part-time employment in Peel has been increasing in recent years. The loss of part-time employment early in the COVID-19 response suggests negative changes in the income of many Peel households due to COVID-19.

• Early impact of the COVID-19 pandemic was evident in the first quarter of 2020, as the decline in OW caseloads slowed.

• Increased government supports put in place for Canadians affected by the pandemic is expected to constrain OW caseloads growth in the short run. Peel’s OW caseloads will likely rise over the medium term as employment insurance benefits and government supports to affected residents end.

• Peel’s average monthly Ontario Works (OW) caseloads declined by 10.5 per cent to 16,790 cases, recording a second consecutive year of decline.

• There were quarterly declines throughout 2019 culminating in Q4, which marked the lowest quarterly average monthly caseload since 2012.

• Lower OW caseloads continued alongside improvements in Peel’s labour market.

2019 Ontario Works Caseloads Review & 2020 Outlook After a decline in caseloads in 2019, demand for social services is likely to increase

10

Number of business establishments2 was 177,2223 in 2019.

2 The total number of registered businesses. 3 Comparison is with number of business establishments in December 2018 as the data is not seasonally adjusted and therefore not comparable to June’s data.

Source: Office of the Superintendent of Bankruptcies


In 2019:

• Business bankruptcies have followed a downward trend in recent years and continued to decline in 2019.

• Net liability per business bankruptcy case increased in 2019. This may be due to low rate of interest, making debt more attractive to businesses and consumers.

Business Bankruptcies declined by 30.9 per cent

in 2019

2019 Business Sector Review & 2020 Outlook

Bankruptcies declined and number of business establishments increased in 2019

11

2020 OUTLOOK: Slow down in business activity with rising bankruptcies

• With business closures associated with the COVID-19 pandemic, many businesses have

ceased or reduced operations. Business activities are expected to decline in 2020.

• The federal and provincial government have provided support to Canadian businesses to

minimize negative impacts of the COVID-19 pandemic.

• In past economic downturns, the number of business bankruptcies in Peel increased significantly and similar patterns are expected in 2020.

• As the impact of COVID-19 subsides, Peel’s business sector is expected to gradually return to growth and job creation over the medium to long term.

• The number of jobs in Peel is forecasted to increase from 768,000 in 2016 to 870,000 by 2041.

2019 Business Sector Review & 2020 Outlook Businesses bankruptcies likely to increase in 2020 due to business closures

12

2020 OUTLOOK: Manufacturing sector to contract

• Manufacturing activities across Canada and Ontario are expected to be negatively impacted

by the COVID-19 related closures, starting in March 2020.

• This will contribute to lower production and employment opportunities in the

manufacturing sector across Canada, including Peel.

• Fiat Chrysler is a major contributor to Peel’s economy and a source of employment for most Peel

residents working in the manufacturing sector.

Source: Fiat Chrysler Automobile

Fiat Chrysler Automobiles

Brampton Assembly Plant Employment

Mixed changes were recorded in manufacturing indicators in 2019:

• Canadian Manufacturing GDP declined by 0.9 per cent in the last quarter of 2019 and

contributed to a 0.1 per cent decline in annual manufacturing GDP in 2019.

• Ontario Manufacturing GDP declined by 0.7 per cent in 2019.

• In 2019, number of residents employed in the manufacturing sector increased by 14.9 per

cent (15,400 positions). However, the number of jobs at Fiat Chrysler Assembly plant

declined, which is consistent with a 7.2 per cent decline in Canadian auto production.

3,191

2019

Brampton Plant Employment

3,521

2018

2019 Business Sector Review & 2020 Outlook Amidst the trending down of traditional manufacturing sub-sectors, manufacturing

activities remain an important contributor to Peel’s economy

*F is a forecast

Brampton Plant Production

13

2019 Construction Sector Review & 2020 Outlook

In 2019:

• The total value of building permits issued reached a four-year high of $3.65 billion.

• Growth was driven by both the residential and non-residential sub-sectors, but concentrated

mostly in the City of Brampton, where the total value of building permits issued surged by

95.6 per cent to $1.64 billion.

Value of building permits increased by 23.8 per cent to $3.6 billion in 2019, with

the residential sector leading growth


Growth in construction activities in Peel in 2019

14

Housing starts4 increased by 0.7 per cent in 2019

4 The number of new residential units at the construction stage where concrete has been poured for the footing around the structure.

In 2019:

• The total number of housing starts in Peel was 5,011 units in 2019, a comparable level to 2018

levels. However, it was below the long-term average and the level consistent with growth targets.

This was due to unaffordability concerns associated with both the average price and a more

stringent housing policy environment.

• The long-term shift in Peel’s housing starts towards the multiple segment of the market continued in 2019 as multiples starts increased its share of total starts to 80 per cent in 2019, compared with 73 per cent in 2018. There was growth in multiple starts in all three municipalities in Peel.

• Demand has shifted towards the multiple segment due to affordability concerns in the singles

segment of the market.

2020 OUTLOOK: Construction activities curtailed by COVID-19 related closures

• With the COVID-19 associated economic shutdown, building intentions as measured by the

value of building permits issued in Peel in 2020 is likely to fall.

• Peel’s housing starts are expected to decline in 2020, relative to 2019, given the halt in

construction activities in March and April associated with the COVID-19 measures.

Source: Canada Mortgage and Housing Corporation

2019 Construction Sector Review & 2020 Outlook COVID-19 interrupted a growing local construction sector with an expected rebound

in the later half of 2020

6,739 4,978 5,011

Source: Canada Mortgage and Housing Corporation

2019 2017 2018

15

Residential resale units5 sold recorded growth in 2019

Residential resale price6 increased by 5.7 per cent in 2019

AVERAGE PRICE OF RESIDENTIAL RESALE UNITS IN THE GTA IN 2019

5 The total number of existing residential units that are sold over a given time period. 6 The average price of an existing residential unit sold over a given time period.

2019 Residential Resale Market Review & 2020 Outlook

In 2019:

• Peel’s residential resale units increased by 15.4 per cent to 18,467 as the market rebounded after

two consecutive years of decline.

• Increases were observed in all three municipalities in Peel.

• The average price of a unit sold in the Greater Toronto Area (GTA) increased at a slower year-over-

year pace (4.1 per cent) than that recorded in Peel, but Peel maintained its place as one of the

most price competitive locations among GTA Regions.

Residential resale activity and price increased in 2019

Source: Toronto Real Estate Board

York Region Toronto Halton Region GTA Average Peel Region Durham Region

16

2020 OUTLOOK: Residential resale activity to decline in 2020

• Residential resale activities in Peel fell in April 2020 due to the onset of COVID-19.

• Volume of sales is expected to decline further in upcoming months due to potential health risks associated with home-visits and interactions among market participants.

• With slower growth in average price, economic activity in the residential resale market declined in April 2020.

• Both the demand and supply of residential resale units are expected to contract due to health concerns associated with the COVID-19 pandemic, making the changes in sales and average price uncertain.

Residential Resale Market Review & 2020 Outlook

Source: Toronto Real Estate Board

Residential resale activity to slow down in 2020 due to physical distancing protocols

17

2020 OUTLOOK: Broad-based economic deterioration outlook due to the

onset of the COVID-19 pandemic

• In 2020, and for the first time since The Great Depression that both developed, and

emerging and developing economies will be in a recession at the same time. The world

economy is forecasted to contract by 3 per cent in 2020 (International Monetary Fund, April

2020).

• The Canadian economy is also expected to follow a similar path of a deep contraction in the

second quarter of 2020, followed by a gradual recovery. Given the uncertainty around the

COVID-19 pandemic, growth forecasts continue to be revised as the situation evolves.

• Peel’ economy will be impacted negatively by the COVID-pandemic in the short-term. The

extent of the impact is currently unknown. As the national and provincial economies

recover, a similar recovery is expected in Peel in the medium to long-term.

Economic Outlook for 2020 Global, Canadian and provincial economies estimated to be a in a recession in the first two quarters of 2020; recovery to follow later in the year

2019 year in review and 2020 outlook · 2020 outlook: canadian and provincial economies expected to...

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