‘Bounce back’ forecast for city’s economy after so-so 2024

Article content

London’s once hot economy remains “healthy” although it slowed this year to a steady pace that is expected to continue through 2025, says an economic report released Thursday.

London enjoyed a 3.2 per cent increase in the value of goods made here, called gross domestic product or GDP, in 2023. However, higher inflation and interest rates slowed that to 1.7 per cent this year. GDP is expected to rise 2.1 per cent next year, averaging 2.6 per cent between 2026 and 2028, says the report by the Conference Board of  Canada.

Article content

“We are expecting a slowdown this year, but it is still healthy,” said David Ristovski, economist with the agency. “We are seeing a bounce back from 2025 to 2028, an annual average gain of 2.6 per cent. There will be strong growth.”

The agency’s analysis offered a snapshot of the economy as this year winds down, and into 2025.

London’s job outlook

Hiring in London will grow 1.5 per cent this year and another 1.3 per cent is expected in 2025, a drop from 3.8 per cent in 2023. The board forecasts the addition of 4,600 net new jobs.

The unemployment rate is expected to average six per cent next year. Last week, Statistics Canada reported the London area added 1,400 jobs in October, the second straight month of employment gains for the region. Despite the gains the jobless rate for the region was unchanged from September’s 6.4 per cent, due largely to the loss here of more than 7,000 jobs during the summer.

Other unemployment rates are: Ontario seven per cent, national 6.5 per cent, Windsor 8.8 per cent, Kitchener-Waterloo 7.8 per cent, St. Catharines-Niagara 6.7 per cent. 

“This is consistent with what we are hearing,” said Bashir Adeyemo, research lead with the city and region’s workforce development board.

Article content

Article content

“The economy is still rebounding. There is more confidence with rates dropping, confidence is growing.”  

Where the jobs are in London

Employment in education is on track to expand 14.3 per cent, while employment in health care and social services is expected to slow 3.5 per cent. This year, employment in the manufacturing sector is forecast to increase 4.3 per cent, while employment in finance, insurance and real estate will fall one per cent.

London’s construction sector is expected to post job gains of 2.6 per cent in 2025, with work on the Volkswagen EV battery plant providing a boost. 

“This is in line with what we hear,” said Jason Bates, general manager of the London Region Manufacturing Council. 

“It is steady, not super busy and not slow, not a lot of hiring, but not laying off either. Right now, I feel like we are holding our own.”

What about London wages and salaries?

Wages and salaries are expected to rise 3.7 per cent in 2024 and 2.4 per cent in 2025. At the same time, household disposable income is projected to increase 6.7 per cent this year, followed by a 3.1 per cent expected gain next year. 

Article content

Retail sales are expected to increase 2.8 per cent this year. Next year, growth in retail sales are forecast to increase 3.4 per cent as economic conditions improve. 

The Volkswagen boost

Growth in the manufacturing sector will be 1.8 per cent in 2024, but is expected to rise to two per cent next year, the conference board report says. Between 2026 and 2028, manufacturing output is expected to grow at an average annual rate of 3.7 per cent, due in large part to the opening of the Volkswagen EV battery plant.

VW’s battery plant in St. Thomas is expected to open in 2027, a $7 billion investment that will employ 3,000 to make electric batteries for the automaker. The city could see manufacturing output rise from the second half of 2027 to early in 2028.

“The battery plant will create jobs in construction during the building phase and subsequently in manufacturing once the plant opens. It will also generate spinoff jobs in other industries such as transportation and warehousing once production is in full swing,” the report says. 

London house starts expected to ramp up

Housing starts will continue to rise as the area and building sector look to meet demand, helped by federal government investments, the board says.

Article content

London’s housing market cooled in 2023 but saw a rebound in the first quarter of this year. The conference board expects housing starts to rise from 2,200 units last year to 3,400 units in 2024. The $74 million in federal funding to help build new homes will boost housing starts during the next few years.

London also is receiving $90 million from the federal government’s national housing strategy and an additional $16 million for homelessness.

As a result, housing starts in London are projected to rise to 3,900 in 2025, and continue trending upward throughout the forecast period. By 2028, total starts are expected to reach 4,200 units.

Steady growth expected in London construction

Output in the London construction industry is on track to grow 2.7 per cent this year, with a further 2.5 per cent gain expected in 2025.

The Adelaide Street underpass project and the east London link and Wellington gateway for bus rapid transit are examples of ongoing multimillion-dollar road and infrastructure projects helping the city’s construction sector in 2024. Some of the work on these projects will carry over into 2025.

Overall, output in the city’s construction sector is forecast to grow at an average annual rate of three per cent between 2026 and 2028.  

Article content