Ontario's economy expanded 0.7 percent in the third quarter, reversing a 0.2 percent decline in the second quarter and steering Canada's manufacturing heartland away from another recession.

A provincial government report released on Monday showed Canada's most populous province, which relies heavily on the shipment of autos and parts to the United States, saw exports rise 1.1 percent, while imports fell 0.6 percent in the third quarter.

The auto sector was hit hard in the second quarter by supply chain disruptions caused by the tsunami in Japan, thrusting Ontario - and Canada's economy as a whole - into contraction for the first time since the global financial crisis.

Statistics Canada reported in November that the country's economy as a whole recovered sharply in the third quarter.

Ontario said real output by industry advanced 0.9 percent in the third quarter, following a 0.3 slip in the second quarter, with both the goods-producing and service sectors posting gains.

In November, the province cut its growth, revenue and reserve targets, but said it was still on track to eliminate its C$16 billion ($15.71 billion) deficit in six years, without lowering total program spending or raising taxes.

The government will release its 2012-13 budget in the spring, after a long-awaited report of policy recommendations from former Toronto-Dominion Bank chief economist Don Drummond.

($1 = $1.02 Canadian)

Japan Manufacturing Tsunami Japan