TORONTO, March 15 /CNW/ - Capital spending, led by public sector
mega-projects, will pace the Quebec economy this year, according to Scotia
Economics' latest Provincial Trends report.
    "Public non-residential construction spending is expected to be the
leading contributor to growth this year, with a number of hydroelectric
projects in the north, and hospital expansions in Montreal," says Adrienne
Warren, Senior Economist, Scotiabank. "Private sector investment plans are
also positive, mainly coming from the energy and metal & mineral sectors."
    Quebec's large manufacturing sector will continue to weigh on overall
economic prospects in 2007, as ongoing competitive issues and a slowing U.S.
economy hold GDP growth below two per cent. Still, the economists anticipate
better prospects for some manufacturers.
    "Quebec's aerospace industry should benefit from a pick up in business
activity," adds Ms. Warren. "In addition, household spending will be supported
by solid income growth in 2007, benefiting from a lower provincial income tax
burden."
    For the third year in a row, Canada is expected to post slower output
growth. Despite the continuing solid gains in the country's resource-rich
regions, manufacturing activity remains under pressure from non-stop foreign
competition, rising input costs and a strong Canadian dollar. Meanwhile,
deteriorating affordability, largely due to higher prices, is expected to put
a chill into the housing market.
    Helping to pick up the slack, capital spending will provide solid
support. Not restricted to energy- and mining-rich provinces, such as
Alberta's oil sands, Saskatchewan's uranium mines or Newfoundland & Labrador's
nickel mines and offshore oilfields, non-residential construction will remain
a key source of growth in such areas as public infrastructure, sea and airport
expansions and commercial building developments, just to name a few. The
spillover effect of construction activity should also benefit other sectors.
Services should remain robust, providing solid underlying support to output
growth, as well as employment opportunities.
    From a regional perspective, growth in the Western and Atlantic regions
should outpace the national average in 2007, while Central Canada lags behind.
Newfoundland & Labrador is expected to best the other provinces as its mining
sector recovers. A slowdown in non-residential construction will moderate
growth in Alberta and B.C., although the two provinces should remain at the
top of the pack. Ontario and Quebec will likely continue to face weakness in
manufacturing amid industry restructuring.

    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.