TORONTO, July 19 /CNW/ - Strong resource-based activity continues to spur
growth in Western Canada, underpinning consumer and investment spending
through 2008, according to Scotia Economics' latest Provincial Trends report.
    "Alberta will remain a top provincial performer for the foreseeable
future, driven by broad-based strength," says David Hamilton, Economist,
Scotiabank. "Overall oil production will continue to increase as new oil sands
projects start up and upgraders are built. Aside from the oil sands,
infrastructure will see significant investment over the next few years to
service record net inter-provincial migration."
    British Columbia should experience solid economic growth in 2007-2008
given substantial construction projects and a vibrant mining sector, though a
beleaguered forestry sector continues to be a drag on overall activity.
Transit and highway upgrades, and seaport expansions are boosting public
investment spending, while several large-scale mining developments and
pipeline projects keep the private sector fully engaged.
    Saskatchewan's economic prospects are favourable, given strong global
demand for potash and uranium, and rising prices. Prospects for the province's
agricultural industry are also looking up, with grain and canola prices
underpinned by global ethanol and biodiesel demand, leading to increased
seeding intentions by farmers.
    "Manitoba should see solid economic growth as public-sector construction
activity, particularly for new hydro-generating capacity, boosts capital
spending," says Mr. Hamilton. "Manufacturing activity should benefit from
strength in transit bus deliveries, pork processing and aerospace parts, while
multi-year reduction of households' tax burden will provide support for
household spending."
    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.