TORONTO, July 19 /CNW/ - Ontario's economy is expected to remain in the
slow lane of growth over the 2007-2008 period, as ongoing weakness in
manufacturing offsets major public and private construction projects,
according to Scotia Economics' latest Provincial Trends report.
    "The province's auto sector is mired in a big slump, although the Big
Three are actively restructuring operations," says David Hamilton, Economist,
Scotiabank. "While difficulties persist for the province's forest products
sector, key bright spots exist, including Ontario's mining sector, which is
currently riding a wave of high global demand."
    "Public and private non-residential construction should expand moderately
in 2007 and 2008," adds Mr. Hamilton. "Several large mining developments and
numerous new office towers are currently underway, in addition to the
revitalization of the auto sector. Public investment will be significant over
the forecast period as the provincial government undertakes several
large-scale infrastructure projects."
    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.