TORONTO, Feb. 21 /CNW/ - Strong resource-based activity in Western Canada
will continue to underpin solid consumer and investment spending in 2008,
according to Scotia Economics' latest Provincial Trends report.
    "Alberta's output growth should top the provincial performance ladder at
3.2 per cent in 2008, driven by broad-based business and consumer strength,"
says David Hamilton, Economist, Scotiabank. "Private and public construction
activity will remain robust, and oil production will continue to increase as
new oil sands projects start up over the next few years. Strong employment
growth and income support will continue to bolster household spending in the
province."
    British Columbia will remain one of Canada's economic growth leaders,
with real GDP set to expand by 2.8 per cent this year, underpinned by strong
construction activity, and robust mining and service sectors. While the
forestry sector will continue to consolidate, the run-up to the 2010 Winter
Olympics and development of the Pacific Gateway bode well for employment
prospects in the province.
    In Saskatchewan, surging mining activity and strong domestic demand will
help the province grow three per cent in 2008. A rising inflow of migration,
sizeable employment growth and fiscal stimulus have led to a surge in
household income and spending. The agriculture sector will benefit from record
grain prices, although hog producers are under pressure.
    "Manitoba should witness solid output growth of 2.5 per cent this year,
largely due to robust construction activity and high demand for metals and
minerals," says Mr. Hamilton. "Construction on the Wuskwatim dam will pick up
this year and the manufacturing sector will benefit from strong demand for
transportation products, particularly aerospace parts and buses."
    According to the report, a combination of factors, heightened foreign
competition, a soaring loonie, and more recently, a weakening U.S. economy,
are restraining Canada's overall economic performance, with the manufacturing
sector bearing the brunt of the slowdown. National output growth is expected
to decelerate from an average of 2.6 per cent in 2007 to 1.9 per cent in 2008.
    At the same time, however, non-residential construction and ongoing
strength in service industries are providing enough forward momentum across
the provinces to offset these headwinds. Construction activity, in particular,
is receiving solid support from both private and public sectors, mainly for
spending on infrastructure.
    Federal, provincial and municipal governments have announced significant
multi-year infrastructure investments. Faced not only with the need to upgrade
roads, bridges and water treatment systems, Canada is also challenged by a
growing economy and population base. At the provincial level, British
Columbia, Ontario and Quebec propose ambitious longer-term transit
development. Alberta faces a critical need to upgrade the infrastructure
surrounding the oil sands. Quebec is spending a substantial amount on
super-hospital projects, as well as investing in power generation and
transmission facilities. On the East coast, the Atlantic Gateway initiative
aims to increase port activity alongside an improved transportation network.
    "Although most provinces are expected to witness some softening in growth
in 2008, there will continue to be significant regional disparities between
the Western, Central and Atlantic provinces," says Mr. Hamilton.
    Regionally, the West will continue to lead with average growth of three
per cent, underpinned by the booming energy and mining sectors. Central
Canada, mired by weakness in its export-oriented manufacturing sectors, will
trail the national average with 1.4 per cent growth in 2008. Similar to the
West, average growth of 1.8 per cent in the Atlantic provinces will be
supported by the continuing resource boom.

    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.