TORONTO, July 19 /CNW/ - Energy-related production and investments in
Atlantic Canada are ongoing, though fewer major construction projects will
limit the region's overall economic advance in 2007-2008, according to Scotia
Economics' latest Provincial Trends report.
    "Newfoundland & Labrador is expected to have the highest growth across
the provinces this year before cooling in 2008 with no major projects on the
horizon," says David Hamilton, Economist, Scotiabank. "Oil and gas output will
likely level off by 2008 as production peaks at the Hibernia and Terra Nova
fields, but exploration activity remains vibrant."
    Prince Edward Island is expected to record moderate growth over the
forecast horizon, as gains in the potato industry are tempered by an uncertain
outlook for the fishery. No major capital projects are planned over the next
two years.
    Service sector growth will help sustain Nova Scotia's economy. At the
same time, gains in the aerospace, shipbuilding and machinery and equipment
industries should help offset continuing pressures in the forest products
sector. Natural gas production is expected to increase this year before
stabilizing in 2008.
    "New Brunswick's economy in 2007-2008 will benefit from strong
construction activity, helping to offset sluggish household spending and
ongoing restructuring in the forestry sector," says Mr. Hamilton. "Strong
demand will boost the mining sector this year and exploration activity has
also picked up."
    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.