Average Provincial GDP Growth Rates For 2011-12 Forecast Period:
TORONTO, July 6, 2011 /CNW/ - After a strong 18 months of recovery, the Canadian economy is gravitating to a slower growth trend, according to Scotia Economics' latest Provincial Trends report. The production disruptions caused by Japan's early year disaster should be recouped in the second half of the year, but Canada still faces a number of challenges that will likely keep growth on a relatively modest upward track.
"Record household debt levels, high food and gas prices and a cooling housing market have begun to moderate consumer spending," said Alex Koustas, Economist for Scotia Economics. "Meanwhile, government stimulus spending is winding down, and will likely act as a drag on growth in 2012 as fiscal shortfalls are addressed. In this environment, exports and business investment will be the key drivers of growth."
According to Mr. Koustas, the Western provinces, along with Newfoundland and Labrador, are expected to outperform the rest of Canada, building on a broad trend that has developed over the past decade. Central Canada has shown significant progress, with a restructured manufacturing sector displaying solid performance and an increased range of services providing potential for stronger future gains. The performance in Atlantic Canada is expected to be mixed. Increased investment in the resource sector will support strong growth in Newfoundland and Labrador, while the Maritime provinces will be challenged by sluggish employment performance and fiscal restraint.
Provincial Outlook
British Columbia
British Columbia will outperform the national trend, but lag behind
Alberta and Saskatchewan, with output growth expected to average
roughly 3.0 per cent in 2011-12. Expansion in the commodity sector is
being paired with burgeoning high-tech industries and diversification
efforts by several established industries, most notably forestry.
Development of the province's mining industries will be a key source of
growth.
Alberta
Once again, Alberta will lead Western Canada's outperformance, with
growth averaging 3.7 per cent in 2011-12. The oil sector will be the
engine behind Alberta's growth, with significant investment and output
gains contributing to the increasing momentum. Alberta is also expected
to lead the country in job creation over the 2011-2012 period.
Saskatchewan
Saskatchewan will once again find itself at the top-end of regional
economic growth, with output advancing at an average rate of 3.5 per
cent over the 2011-12 forecast period. Further expansion and
development of the potash and crude oil industries have fostered job
growth and an influx of residents. Agriculture, though suffering
through another difficult start to the growing season, will likely
contribute positively given high export prices.
Manitoba
Manitoba is expected to experience GDP growth averaging a solid 2.5 per
cent in 2011-12. A diversified economy will ensure healthy
contributions from a number of sectors including food packaging,
machinery manufacturing, utilities and continued outperformance from
its finance, real estate and insurance industries. Extensive flooding
will severely dampen agricultural output this year, but re-development
efforts related to infrastructure and property will provide some
offset.
Ontario
After outperforming in 2010, Ontario's growth is expected to average 2.3
per cent over the 2011-12 period, trailing Western Canada and falling
roughly in line with Quebec. A number of factors will restrain growth,
including a high Canadian dollar and a subdued economic recovery in the
United States. Ontario's service sector has grown from a 68 per cent
share of the province's economy in 2000 to over 75 per cent in 2010,
highlighting the added importance that the segment has for the
province's overall performance.
Quebec
Quebec withstood the recession better than most provinces, and will see
growth advance at a rate of 2.4 per cent over the 2011-12 period. The
private sector has shown strength, with a diverse manufacturing base, a
dynamic service sector and a burgeoning resource sector. The provincial
government has been proactive in addressing the province's debt burden
but Quebec will experience some drag on economic growth with higher
taxes being implemented and cuts in the province's relatively large
public sector taking place over the next two years.
New Brunswick
New Brunswick is expected to see annual GDP growth average 1.9 per cent
in 2011-12, trailing the national average after a strong year in 2010.
Employment has been sluggish, with losses stemming from service sector
segments shaken by the strong dollar, namely contact centres. Forestry,
fishing, manufacturing and mining have displayed some momentum heading
into 2011, but will be counterbalanced by declining capital investment
and significant fiscal restraint.
Nova Scotia
Nova Scotia is expected to experience GDP growth averaging 1.9 per cent
over the 2011-12 forecast period. The province has cleared some major
hurdles, including stabilizing its manufacturing sector. Nonetheless,
sluggish employment and wage growth will weigh on the consumer sector,
while fiscal restraint also dampens growth.
Prince Edward Island
Prince Edward Island will grow in line with the other Maritime
provinces, with output growth averaging 2.1 per cent in 2011-12. This
represents a relatively solid period of expansion for the province
historically. Output growth will be led by positive contributions from
tourism and agriculture, as well as from food and pharmaceutical
manufacturing.
Newfoundland & Labrador
Newfoundland & Labrador will set the pace in the Atlantic region, with
GDP growth expected to average 3.3 per cent over the 2011-12 forecast
period. Increased commodity production and major investments in
utilities, oil and mining, as well as increased consumer spending will
help offset a slowdown in offshore oil production.
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.
Alex Koustas, Scotia Economics, (416) 866-4212, alex_koustas@scotiacapital.com;
Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625, patty_stathokostas@scotiacapital.com