Virtually every province and sector of the Canadian economy has rebounded sharply, building on the momentum that first emerged in the latter half of 2009 and accelerated into 2010, according to Scotia Economics’ latest Provincial Trends report. Even with some likely moderation in growth going forward, the strong early-year performance has elevated growth rates and pushed Canada to the top of G7 economic rankings. Scotia Economics expects Canadian output growth to average 3.6 per cent this year, the strongest advance in a decade.
“The factors generating the renewed economic gains – strength in emerging market demand, substantial fiscal stimulus, targeted tax incentives and firmer commodity prices – are all supportive of growth for the remainder of the year,” said Alex Koustas, Economist, Scotia Economics. “However, recent market volatility in the wake of the euro zone debt crisis has tempered domestic prospects somewhat going forward. Meanwhile reduced fiscal and monetary stimulus and a cooling off in housing activity will reinforce a slower pace of output growth later this year and into 2011.”
In the report, Mr. Koustas noted that in British Columbia the turnaround seen in real estate, commodities and transportation, combined with the boost of the 2010 Winter Olympic Games, is estimated to lift GDP growth to 3.8 per cent in 2010. Alberta is expected to rebound with GDP growth of 4.1 per cent, as a revival in resource investment and production spill over to manufacturing and services.
“For Saskatchewan, potash exports are expected to regain a fair portion of the ground lost last year, while domestic demand will continue to benefit from strong population gains, leading to GDP growth of 3.9 per cent,” said Mr. Koustas. “Manitoba’s recovery will be slightly more subdued, with rebounding manufacturing activity contributing to GDP growth of 3.1 per cent.”
Ontario entered 2010 in high gear, as auto production ramped up and employment conditions improved. Inventory restocking is expected to continue to fuel gains in manufacturing, while an improvement in service sector activity will underpin GDP growth of 3.6 per cent. In Quebec, raw materials and aerospace-component manufacturing are expected to couple with significant hydro and infrastructure investment, contributing to GDP growth of 3.1 per cent.
“New Brunswick and Nova Scotia are forecast to experience growth of 2.3 per cent and 2.2 per cent respectively, with service sector strength and a moderate recovery in exports as the main catalysts,” concluded Mr. Koustas. “GDP growth of 2.3 per cent is forecast for Prince Edward Island, as healthy tourism activity offsets a slowdown in potato production. Newfoundland and Labrador is forecast to experience growth of 3.8 per cent due in large part to an improved performance in the commodities sector.”
Provincial Trends – Continuing Momentum Across Regions and other Scotia Economics publications are available on http://www.scotiabank.com/ and on Bloomberg at SCOE.
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.