May 2008

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Provincial growth gap narrowing ... except Newfoundland

The recently released annual provincial economic accounts for 2007 confirmed that, while regional disparities persist, the growth gap is on a narrowing path. In fact, if we take Newfoundland out of the equation, the growth gap between the slowest-growing and fastest-growing provinces narrowed to 1.7% in 2007 compared to a whopping 7% in 2006. All of the commodity-rich provinces (including Newfoundland) are sitting above the national average, while the rest of central and eastern Canada are below.

British Columbia powered by consumer strength — The risks to the province’s export sector are still high, but consumer strength powered the province through 2007, resulting in overall solid real growth of 3.1%. The breakdown of GDP by industry highlights this split between consumer strength and export-oriented business weakness. The construction, wholesale and retail sectors all remained in expansion mode last year, while manufacturing, agriculture and industrial production were all in contraction mode.

Alberta growth chopped in half — The province recorded real growth of 3.3% in 2007 compared to 6.6% in 2006. A slower pace of growth was largely the result of a deceleration in oil and gas extraction as well as an outright decline in exploration activity, particularly due to weak activity for natural gas. A slower, but still healthy pace, of growth in the low-3% range is expected this year and next.

Saskatchewan softer than expected, but outlook upbeat — Growth momentum picked up in 2007 to 2.8% following a year of contraction in 2006. Saskatchewan’s growth rate came in below expectations on the back of weakness in its agriculture sector, but still stands well-positioned to benefit from ongoing strength in commodity prices as it moves up in the provincial growth ranking in 2008 and 2009.

Manitoba moving up the growth ladder — The provincial economy expanded by 3.3% last year, holding above the national average for a second year. The growth driver was largely the construction sector, which has grown at a double-digit pace for the last two years. Statistics Canada’s Public and Private Investment Intentions Survey confirmed the strength in Manitoba’s investment sector, with the province expecting 18% gains in new spending initiatives in 2008.

Ontario holds on despite manufacturing woes —Ontario managed to pump out growth of 2.1% last year. The manufacturing sector remained in contraction mode as output declined for a third consecutive year. The role of manufacturing in the economy continued to fall as well. In 2002, manufacturing accounted for 22% of Ontario’s GDP compared to 18% in 2007. Widespread strength in other sectors — including a vibrant consumer and a healthy construction sector — helped offset the decline.

Quebec gets a boost from the consumer — The province reported real growth of 2.4% last year, hugging just below the national average. Domestic strength was a big support of the growth numbers last year. Personal consumption was up 4.6%, marking its fastest annual pace of growth since 1985. On the manufacturing front, the province continues to hold up better than neighbouring Ontario.

New Brunswick's construction sector still hot — Real growth came in at 1.6% in 2007 as contractions in the manufacturing (down 6.1%) and agriculture (down 4.7%) sectors weighed on the economy. However, an important offset is coming from the construction sector (up 10.9%). Non-residential investment rose 33% last year and residential investment was up a solid 7%.

Nova Scotia's service sector supports growth — Nova Scotia’s economy also grew 1.6% last year with momentum expected to pick up into 2008. The construction sector contracted last year, but the commencement of some large-scale capital projects should give the non-residential sector of the economy a boost in 2008.

Food processing powers Prince Edward Island in 2007 — Real growth came in at 2% last year. The overall manufacturing sector registered healthy growth of 5.2%, but this was largely a result of food processing gains. In contrast, the durable manufacturing sector contracted nearly 21%.

Newfoundland growth jumps to 9.1% in 2007 — A surge in the province’s growth last year came on the back of a steep climb in mining and oil and gas extraction activity. Industrial production surged 21%. White Rose, Voisey’s Bay and the Duck Pond mine had production firing on all cylinders, which provided a nice lift to growth. With production having peaked in 2007, growth is expected to cool off sharply with some sectors being hit harder than others. The construction sector took a hit as many large-scale projects shifted out of construction and into production mode.