TORONTO, July 19 /CNW/ - Strong capital investment spending and improving
household income growth will underpin Quebec's economic prospects in 2007 and
2008, according to Scotia Economics' latest Provincial Trends report.
    "Public non-residential construction spending on health, education,
infrastructure and utilities continues, with hydroelectric mega-projects a
major contributor," says David Hamilton, Economist, Scotiabank. "On the
private sector side, a number of iron ore, zinc and nickel mines are under
development and an Liquid Natural Gas (LNG) terminal has gained government
approval to proceed with construction."
    Quebec's manufacturing sector outlook is mixed. "Much like the rest of
Central and Eastern Canada, the province's large forestry sector is
restructuring," adds Mr. Hamilton. "On the bright side, Quebec's aerospace
industry outlook looks very positive given sizeable airplane orders, mainly
for regional jets, amid a booming global aerospace market."
    According to the report, Canadian real GDP growth is expected to average
around 2.5 per cent in 2007 and 2008, roughly half a percentage point below
the average of the previous three years. While this should largely mirror both
the slowdown in the U.S. economy and the growth-robbing shortage of labour and
selected materials, it obscures several key trends that are continuing to
dominate Canada's underlying performance.
    First, the pace of economic activity remains two to three times greater
in the resource-rich regions in the west, north and east. Export-sensitive
manufacturing-centric provinces in Central Canada remain constrained, not only
by the U.S. slowdown, but by the loss of competitiveness associated with
increased foreign competition and an even stronger Canadian dollar.
    Second, in all provinces, domestic-led activity remains fairly robust,
led by consumer spending, non-residential construction, and services.
    And thirdly, infrastructure spending will remain a key driver of domestic
growth across all provinces. Besides the much-needed outlays in health and
education, there is a renewed push to upgrade transportation networks and
ports, in addition to new green initiatives.

    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.