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Diverging Provincial Performances Mark Canada's More Subdued Growth Outlook: Scotia Economics

TORONTO, Ontario, July 06, 2011 — Average Provincial GDP Growth Rates For 2011-12 Forecast Period: * British Columbia, 3.0 per cent; * Alberta, 3.7 per cent; * Saskatchewan, 3.5 per cent; * Manitoba, 2.5 per cent; * Ontario, 2.3 per cent; * Quebec, 2.4 per cent; * New Brunswick, 1.9 per cent; * Nova Scotia, 1.9 per cent; * Prince Edward Island, 2.1 per cent; * Newfoundland & Labrador, 3.3 per cent. TORONTO, July 6, 2011 /CNW/ - After a strong 18 months of recovery, the Canadian economy is gravitating to a slower growth trend, according to Scotia Economics' latest Provincial Trends report. The production disruptions caused by Japan's early year disaster should be recouped in the second half of the year, but Canada still faces a number of challenges that will likely keep growth on a relatively modest upward track.

"Record household debt levels, high food and gas prices and a cooling housing market have begun to moderate consumer spending," said Alex Koustas, Economist for Scotia Economics. "Meanwhile, government stimulus spending is winding down, and will likely act as a drag on growth in 2012 as fiscal shortfalls are addressed. In this environment, exports and business investment will be the key drivers of growth."

According to Mr. Koustas, the Western provinces, along with Newfoundland and Labrador, are expected to outperform the rest of Canada, building on a broad trend that has developed over the past decade. Central Canada has shown significant progress, with a restructured manufacturing sector displaying solid performance and an increased range of services providing potential for stronger future gains. The performance in Atlantic Canada is expected to be mixed. Increased investment in the resource sector will support strong growth in Newfoundland and Labrador, while the Maritime provinces will be challenged by sluggish employment performance and fiscal restraint.

Average Provincial GDP Growth Rates For 2011-12 Forecast Period:

  • British Columbia, 3.0 per cent;
  • Alberta, 3.7 per cent;
  • Saskatchewan, 3.5 per cent;
  • Manitoba, 2.5 per cent;
  • Ontario, 2.3 per cent;
  • Quebec, 2.4 per cent;
  • New Brunswick, 1.9 per cent;
  • Nova Scotia, 1.9 per cent;
  • Prince Edward Island, 2.1 per cent;
  • Newfoundland & Labrador, 3.3 per cent.

Provincial Outlook

British Columbia

British Columbia will outperform the national trend, but lag behind Alberta and Saskatchewan, with output growth expected to average roughly 3.0 per cent in 2011-12. Expansion in the commodity sector is being paired with burgeoning high-tech industries and diversification efforts by several established industries, most notably forestry. Development of the province's mining industries will be a key source of growth.

Alberta

Once again, Alberta will lead Western Canada's outperformance, with growth averaging 3.7 per cent in 2011-12. The oil sector will be the engine behind Alberta's growth, with significant investment and output gains contributing to the increasing momentum. Alberta is also expected to lead the country in job creation over the 2011-2012 period.

Manitoba

Manitoba is expected to experience GDP growth averaging a solid 2.5 per cent in 2011-12. A diversified economy will ensure healthy contributions from a number of sectors including food packaging, machinery manufacturing, utilities and continued outperformance from its finance, real estate and insurance industries. Extensive flooding will severely dampen agricultural output this year, but re-development efforts related to infrastructure and property will provide some offset.

Ontario

Quebec withstood the recession better than most provinces, and will see growth advance at a rate of 2.4 per cent over the 2011-12 period. The private sector has shown strength, with a diverse manufacturing base, a dynamic service sector and a burgeoning resource sector. The provincial government has been proactive in addressing the province's debt burden but Quebec will experience some drag on economic growth with higher taxes being implemented and cuts in the province's relatively large public sector taking place over the next two years.

New Brunswick

New Brunswick is expected to see annual GDP growth average 1.9 per cent in 2011-12, trailing the national average after a strong year in 2010. Employment has been sluggish, with losses stemming from service sector segments shaken by the strong dollar, namely contact centres. Forestry, fishing, manufacturing and mining have displayed some momentum heading into 2011, but will be counterbalanced by declining capital investment and significant fiscal restraint.

Nova Scotia

Nova Scotia is expected to experience GDP growth averaging 1.9 per cent over the 2011-12 forecast period. The province has cleared some major hurdles, including stabilizing its manufacturing sector. Nonetheless, sluggish employment and wage growth will weigh on the consumer sector, while fiscal restraint also dampens growth.

Prince Edward Island

Prince Edward Island will grow in line with the other Maritime provinces, with output growth averaging 2.1 per cent in 2011-12. This represents a relatively solid period of expansion for the province historically. Output growth will be led by positive contributions from tourism and agriculture, as well as from food and pharmaceutical manufacturing.

Newfoundland & Labrador

Newfoundland & Labrador will set the pace in the Atlantic region, with GDP growth expected to average 3.3 per cent over the 2011-12 forecast period. Increased commodity production and major investments in utilities, oil and mining, as well as increased consumer spending will help offset a slowdown in offshore oil production.

Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

News source: Scotiabank

 

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