Heading into 2010, there are clear signs that the Ontario economy has turned the corner and started to expand.

This observation is reinforced by several key indicators.

First, since May of this year the province has regained slightly over 15% of the 200,000 full-time jobs it lost since the first quarter of 2008.

In addition, sales of existing homes, fuelled by a combination of lower prices and record low interest rates, have trended higher since they bottomed out in January. On a year-over-year basis, they are up 14%.

Moreover, average house prices in the province are up by 10.7%. This is the second strongest year-over-year increase since December 2007. In addition, demand for new homes has started to recover and since April housing starts are up by 35%.

Although housing demand and consumer spending are showing definite signs of strength, non-residential construction, which year to date has declined by 2%, remains in the doldrums.

Primarily due to a combination of plummeting corporate profits and a large drop in capacity utilization rates, industrial construction in the province has dropped by 28% year to date. This is its steepest three quarter decline in more than 10 years.

In addition, commercial construction in the province has fallen by 3% year to date as a result of shrinking office-based employment and a surge in new supply, which has pushed vacancy rates higher.

The one bright spot for non-residential construction in the province is institutional construction, which year to date is up 12.1% due to a surge in both federal and provincial stimulus spending.

Looking ahead, Ontario’s domestic economy should continue to benefit from both monetary stimulus in the form of low interest rates and fiscal stimulus in the form of increased government spending.

And the acceleration in U.S. industrial activity, reflected by the recent sharp increase in the index of industrial production, should provide a significant boost to Ontario’s exports, which until recently have been extremely weak.

Following a decline of 3.0% in 2009, we expect the province to grow by 3.3% in 2010.