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TORONTO, ONTARIO--(Marketwire - May 3, 2012) - Robust housing activity and momentum in the auto sector are providing support to the Ontario economy, according to the Provincial Monitor report released today by BMO Economics. However, growth is still being held back by fiscal restraint, the strong loonie and somewhat sluggish U.S. demand. Real GDP grew 2.0 per cent in 2011, and should end up just below 2 per cent this year.

"Auto production ramped up sharply in late-2011/early-2012, providing solid momentum for the sector this year," said Robert Kavcic, Economist, BMO Capital Markets. "Auto producers continue to invest in North America, and Ontario is no exception. Toyota is increasing production at its Woodstock assembly plant which produces the RAV 4. This should result in about 400 jobs in early 2013. Ford announced expansion plans to its Essex Engine plant in Windsor, adding about 100 jobs this spring."

Housing also remains strong in the province, specifically in Toronto where average home prices continue to push record levels, up 10.5 per cent year-over-year in March. "Supply remains relatively tight, especially for detached homes," noted Mr. Kavcic. Condo construction is hot, with the number of units under construction at the highest level on record in February."

"Manufacturers, who have been traditionally dependent on the U.S. for their supply chains and markets for their products, have shown a strong adaptability over the past 12 to 18 months. While still facing some persistent economic headwinds, many of these businesses are in a much stronger growth position today as a result of the efforts they have made to enhance productivity and invest in their businesses," said Susan Brown, Senior Vice-President, BMO Bank of Montreal. "Given the positive agricultural forecast for this growing season, a solid housing market, and new investments and production in the auto sector. Ontario businesses are moving forward with a greater degree of optimism than this time last year."

Employment was up 1.3 per cent year-over-year in March, with slack in the public sector (-1.1 per cent year-over-year) offset by improving growth in the private sector (+2.0 per cent year-over-year). "At 7.4 per cent, Ontario's jobless rate hit the lowest level since late 2008 in March, narrowing the gap with the national rate to just 0.2 percentage points, down from nearly a full percentage point at the depths of recession," stated Mr. Kavcic.

The fiscal 2011-2012 provincial budget deficit is now pegged at $15.0 billion, down from the prior estimate of $15.3 billion, while this fiscal year's shortfall is reduced to $14.8 billion from $15.2 billion. While Ontario's projected deficit-elimination timing is unchanged at fiscal 2017-2018, a small $500 million surplus is now expected.

The full Provincial Monitor can be downloaded at www.bmocm.com/economics.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.