As a country, ‘Great Lakes’ economy would rank 4th

Here's an attention-grabbing fact: the economic output of the Great Lakes region is so big it ranks ahead of Germany, France, Brazil and the United Kingdom. Further, if the region were a country it would rank as the fourth largest economy in the world behind the United States, China and Japan, according to BMO Capital Markets.

"Quite simply, the economic importance of the region can't be overstated," writes Robert Kavcic, a senior economist at the bank, in a report released this week. No kidding.

The good news, according to Kavcic, is that the region is undergoing a slow and steady recovery after a brutal downturn during the recession, which saw nominal output tumble 2.2 per cent between 2007 and 2009. That compares to a 1.2 per cent fall for all of Canada and the U.S.

That's especially welcome news for Ontario as the surrounding states are collectively the province's single largest trading partner, accounting for more than $160 billion of total trade last year. That represents some 36 per cent of Ontario's international imports and exports, says BMO.

The healing is due largely to the recovery in the U.S. economy, bolstered especially by a rebound in auto sales. U.S. auto sales have rebounded close to pre-recession levels at 15.3 million annualized units, says Kavcic. Manufacturing employment is still down sharply from levels seen a decade ago, but the services sector is helping to pick up the shortfall.

Also supportive is the recovery in the U.S. housing market. Home prices in a number of major cities are notching "double-digit year-over-year percentage increases amid the best affordability in at least four decades," while construction activity is showing a pulse.

"The Great Lakes region is a vital driver of North American output, employment and trade," says Kavcic, noting the region accounts for nearly one third of Canada and U.S. economic activity.

"While the region was hit hard during the Great Recession, economic activity has since turned around and is now shifting into higher gear."