Major City Insights

Guelph

June 18, 2024

Overview
Labour and employment
Economic indicators
Construction and real estate

A second year of modest growth anticipated this year

Guelph’s economy slowed through the second half of last year, as still high inflation and increased interest rates lowered demand. Real GDP growth dipped to just 0.7 per cent in 2023, a far cry from the 3.4 per cent gain of the previous year.
With interest rates not expected to start easing until later in 2024, our call is for a second modest 0.7 per cent increase in real GDP this year.
Once inflation slows and interest rates move back down, we should see stronger growth in the coming years. Our call is for a 2.2 per cent gain in 2025 and average growth of 2.6 per cent per year from 2026 to 2028.
Manufacturing sector output is expected to decline for the second year in a row this year, pulled down by lower demand at home and abroad. We expect manufacturing will start to rebound in 2025, growing by 1.9 per cent that year and 3.9 per cent in 2026.
Lower consumer demand will also keep growth in wholesale and retail trade muted through 2024. While wholesale trade is expected to eke out a 0.5 per cent output gain this year, retail trade output will fall by 0.3 per cent. Both sectors are expected to be stronger in 2005, with output in each advancing by 2.2 per cent.
Employment has also weakened in recent months. Though post-pandemic employment growth in Guelph had been strong (an average of 5.7 per cent over 2021 to 2023), we expect job gains will be just 1.1 per cent for 2024 and 0.9 per cent next year.
Although Guelph’s population growth is expected to remain elevated this year, above 2 per cent for the second year in a row, net international migration will fall from the peak levels of the past two years. Accordingly, labour force growth will also slow this year, helping to keep the region’s unemployment rate in check.
Wage growth has picked up, and wages and salaries per employee are expected to rise by more than 4 per cent in 2024, a similar rate to 2023. Our call is for a 3.5 per cent increase next year, with decent average annual growth of 2.5 per cent for 2026 to 2028, in line with slower price gains.
Growth in Guelph’s consumer price index is steadily slowing. After growing by nearly 7 per cent in 2022, the CPI rose an additional 3.8 per cent last year. Our call is for a 2.8 per cent gain in 2024, before inflation eases to 2.1 per cent in 2025, close to the Bank of Canada’s target.

Labour and employment

Growth in Guelph’s employment began to wane in the second half of 2023, as the impacts of higher interest rates worked their way through the economy. Still, thanks to strong job growth at the beginning of the year, employment increased by 3.6 per cent last year.
Modest job gains are in the cards for 2024 and 2025. We expect employment will rise by 1.1 per cent this year and 0.9 per cent next year.
Job growth will be mixed across the goods and services sectors for 2024.
Both manufacturing and the primary and utilities sector are poised to add jobs this year, despite constrained output. Manufacturing employment will increase, up by 3.8 per cent, while employment in the primary and utilities sector will advance by double-digits—welcome news for both sectors after declines in 2023. These two sectors will see further job gains in 2025, although growth will soften.
On the services side, wholesale trade will be one of the hardest-hit sectors in terms of employment in 2024, forecast to drop 7.3 per cent this year. This will be the third year in a row that the wholesale trade sector will shed jobs. A 3.0 per cent increase is our call for 2025.
The professional, scientific, and technical services sector and the transportation and warehousing sector will also feel the impact of this year’s slower economy. Employment in both of those sectors is expected to contract, slipping by 10.5 per cent and 35.2 per cent, respectively.
The weakness in these two sectors will be short-lived, however. Once economic activity picks up in 2025, both sectors are expected to see healthy job gains next year.
The accommodation and food services sector has been on a roller-coaster since the pandemic, with some wild swings in employment. Job growth hit 7.3 per cent last year and we expect average growth of 6.2 per cent for this year and next. Thereafter, we think employment will remain on an upward trend, in line with stable economic growth, with average annual gains of 3.1 per cent on tap for 2026 to 2028.
As employment was falling through the second half of 2023, Guelph’s unemployment rate began to rise. In fact, the rate reached 5.5 per cent in the fourth quarter of last year, nearly two full percentage points higher than the first quarter, and the highest it had been since early 2022.
The unemployment rate came back down in the first couple of months of 2024. Slow employment growth should keep the rate near 4.3 per cent for the rest of this year. With modest employment gains moving forward, Guelph’s unemployment rate will stay fairly stable over the next few years, ending 2028 at 4.2 per cent.

Economic indicators

As in many other Canadian cities, growth in Guelph’s population has been robust in recent years, boosted in large part by higher levels of net international and net intercity migration.
In fact, net intercity migration reached a record high of just over 1,300 in 2021 as work-from-home options led more people from Toronto into more affordable and spacious surrounding areas. New federal international immigration targets then pushed net international migration to an estimated record 3,743 people in 2023.
Net intercity migration is expected to stay near 1,200 units this year and through the following few years. While we expect net international migration will ease from 2024 onward, it will remain at historically high levels for at least the next couple of years.
Accordingly, population growth is expected to be 2.3 per cent in 2024, before easing to an average of 1.5 per cent per year over 2025 to 2028.
Though population gains remain strong this year, the impact of elevated prices and higher interest rates will continue. As a result, our call is for real GDP growth to remain muted this year, at 0.7 per cent for the second year in a row.
Still, there should be some relief as we move through the second half of 2024. The CPI is forecast to rise 2.8 per cent in 2024, slowing to 2.1 per cent in 2025, almost back to the Bank of Canada’s target rate.
Interest rates are expected to start to gradually fall later this year as well. Both factors should lead to a pickup in economic activity. We expect Guelph’s real GDP will advance 2.2 per cent in 2025 and an average of 2.6 per cent per year from 2026 to 2028.
Across industries, we expect mixed results this year. Guelph’s manufacturing sector, its largest (26 per cent total GDP in 2023), has been struggling to fully recover since the pandemic. Lower demand, both domestically and abroad, will result in manufacturing output falling for the second consecutive year in 2024, this time by 0.3 per cent.
We expect the manufacturing sector will start to rebound in 2025, growing by 1.9 per cent that year and 3.9 per cent in 2026.
The city recently saw the opening of Omnia Packaging’s new 90,000-square-foot paper and plastic package plant. The company is still adding machines to the plant, and so we expect production to kick up over the next year, with a plan of about 50 workers for 2025.
Several other consumer-driven sectors are also expected to contract this year. Retail trade output will decline 0.3 per cent, while professional, scientific, and technical services output will slip 0.2 per cent. Both sectors are expected to see output expand from 2025 onward as conditions improve.
Lower retail trade output will be hand in hand with slower nominal retail sales growth. Constrained demand will limit the gain in nominal retail sales growth to just 2.0 per cent this year. From 2025 to 2028, nominal retail sales will advance by an annual average of 3.4 per cent.
Some sectors of the Guelph economy will continue to do well in 2024. Indeed, the healthcare and social services sector is expected to be a growth leader this year, advancing by 3.1 per cent, boosted by elevated population growth as well as an aging baby-boom cohort.
The accommodation and food services sector and the arts, entertainment, and recreation sector will also post decent gains in 2024 as they continue their post-pandemic recovery. Both sectors were still below 2019 levels last year.

Construction and real estate

According to the Canadian Real Estate Association, the average resale home price in Guelph was $908,952 in February of this year, up more than 5 per cent over February 2023. While not at the record levels reached during the pandemic, resale home prices in the region are still historically strong.
Despite the elevated prices and high borrowing costs, activity in Guelph’s resale home market has increased on a year-over-year basis. Indeed, the resale home market has been showing a steady improvement in recent months. Sales in the first two months of 2024 were more than 10 per cent higher than in the same period last year.
Still, resale home sales remain below their 10-year average, and inventories crept up to two months’ supply (up from 1.8 in January), so there is room for growth once interest rates fall.
Unlike in many Canadian cities that saw strong home building through the pandemic, housing starts in Guelph remained low, falling to less than half their 2015–19 average by 2022. But builders came back to the market last year as housing starts reached their highest level in almost 20 years, at 1,280 units.
Much of the increase was in the multiples market, the result of several condominium projects and the city’s efforts to address its housing shortage. Moving forward, housing starts are expected to remain above 1,100 units for the next several years.
The city recently reached an agreement with the federal government to fast-track almost 750 new homes in the next three years. This agreement is through the Housing Accelerator Fund, which will give Guelph more than $21.4 million to help find ways to eliminate some of the red tape associated with new builds and find solutions for more affordable housing.
The city will also receive nearly $5 million in funding through the provincial Building Faster Fund, an amount given after Guelph made progress in reaching its housing targets in 2023.
On the non-residential side, work is ongoing on several projects including the South End Community Centre and a south platform and extension of the north platform at the Guelph GO station.
There is also word of a potential mixed-use development on the former Loblaws property in east Guelph, and public consultations should get under way soon on a downtown infrastructure renewal program.
In all, we expect construction sector output to rise 0.4 per cent in 2024 and 3.2 per cent next year.