TORONTO, March 17 /CNW/ - Every province in Canada has succumbed to the
global economic downturn. The earlier sharp slump in manufacturing activity is
now being reinforced by a loss of momentum across goods- and service-producing
industries, with consumers, builders and resource producers all in
retrenchment mode, according to Scotia Economics' latest Provincial Trends
report.
    "Even the previously booming resource-driven economies in Western Canada
have been caught in the middle of the global economic and financial storm,"
said Adrienne Warren, Senior Economist, Scotia Economics. "The sharp falloff
in global commodity demand and prices are leading to substantial declines in
retail and housing activity, in addition to deep cutbacks in capital spending
plans. In Alberta alone, over $40 billion worth of capital projects have
recently been postponed or cancelled."
    Central Canada, with its large manufacturing sector, is still expected to
witness the sharpest contraction in activity. Ontario's auto industry, which
accounts for 25 per cent of the province's manufacturing output, has
implemented deep production cuts to redress slumping global demand and bloated
inventories. Meanwhile, Quebec's aerospace industry, a pillar of strength in
2008, is facing order deferrals and cancellations as the demand for business
jets dries up and passenger and cargo traffic stalls.
    With no industry effectively insulated, the relatively diversified
economies of Eastern Canada are also expected to show modest output
contractions this year. The retrenchment underway in the manufacturing,
primary and construction sectors has begun to put the squeeze on a range of
professional and business service industries that had been a consistent source
of employment and output growth in recent years. Weak domestic and
international tourism spending will also weigh on the region's prospects.

    Provincial Outlook

    British Columbia

    B.C.'s economy is expected to contract close to two per cent this year,
as slowing construction and services activity reinforce continuing
retrenchment in forest products and a less buoyant resource sector. Still,
some support will come from completing infrastructure work for the upcoming
2010 Winter Olympic Games and several billions worth of public infrastructure
projects being accelerated forward.

    Alberta

    Alberta's economy is expected to contract 2.3 per cent this year, as the
plunge in commodity prices and sharp falloff in global demand weigh on both
goods- and service-producing sectors. On the plus side, there is a large
volume of government infrastructural and institutional works still in the
pipeline to meet expanding population demands.

    Saskatchewan

    Saskatchewan will likely post no growth this year, a comparatively good
performance for last year's provincial growth leader. The province will be
helped through the global economic storm by the development prospects of its
potash and energy industries as well as continuing, albeit more modest, gains
in service-sector activity.

    Manitoba

    Manitoba is expected to experience one of the smallest economic
contractions among the provinces this year, at 0.7 per cent. The provincial
economy is insulated to some degree against sector-specific shocks by being
well diversified, with a good balance of commodities, agriculture,
manufacturing and services.

    Ontario

    Ontario's economy is expected to contract for a second straight year in
2009, posting a decline of almost three per cent. The weaker Canadian dollar
and ongoing infrastructure spending are providing some relief, but not enough
to offset further big cutbacks in manufacturing, mining and steel production,
as well as a rapid cooling in service sector activity.

    Quebec

    Real output for Quebec is projected to decline 2.5 per cent this year, as
the province's large forest products, mining and manufacturing industries all
face considerable challenges. However, the drop-off is slightly less than in
Ontario, reflecting strong public investment and a more diversified, albeit
smaller, manufacturing base.

    New Brunswick

    New Brunswick is expected to outperform the national average in 2009, but
will still post negative growth of one per cent. A number of large capital
projects will help buoy the economy and counterbalance declines in exports and
manufacturing production.

    Nova Scotia

    Nova Scotia's economy is expected to contract 1.2 per cent this year as
natural gas prices remain low, shipping volumes decrease and manufacturing
slows. Still, for the second year in a row, the province will outperform the
national average, propped up by construction and services.

    Prince Edward Island

    Prince Edward Island is expected to witness a drop in growth of 1.4 per
cent in 2009. Although no new major construction projects are on the horizon,
several smaller investments will provide support, including the West Cape wind
park, a Charlottetown hospital redevelopment and infrastructure spending.

    Newfoundland & Labrador

    After torrid growth in 2007 and early 2008, the province of Newfoundland
& Labrador is expected to contract 0.5 per cent this year. The energy and
mining industries, which have been key catalysts for the economy, will be
challenged by weak market conditions that are unlikely to improve
substantially before year-end.

    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.