Canada’s Slowing Economic Momentum Masks Diverging Regional Trends, Scotia Economics

Nov 17, 2010 | Corporate Member News

Canada’s growth performance has shifted to a lower gear, mirroring trends in the broader global economy, according to Scotia Economics’ latest Provincial Trends report. Growth will be relatively more robust in the West, with high commodity prices stoking resource investment and production, and supporting relatively firmer employment, income and spending trends. The Atlantic region is expected to see fairly steady, moderate growth in the year ahead.

“The slower national momentum over the spring and summer is expected to persist into 2010, reflecting a number of factors, including a winding down of inventory restocking, a cooling off in housing activity and a more cautious consumer,” said Alex Koustas, Economist, Scotia Economics. “Meanwhile, resource-related activity is ramping up alongside strong emerging market demand for key industrial products, which along with a weaker U.S. dollar, is boosting commodity prices.”

According to Mr. Koustas, these shifting growth dynamics will tend to favour the resource-rich regions in the East, West and North of Canada, while the more manufacturing-heavy areas will be challenged by the slow pace of U.S. growth and a less competitive currency. As a result, after a strong manufacturing-led rebound this year, output growth in Central Canada is expected to moderate considerably in 2011.

Provincial Outlook

British Columbia
British Columbia is expected to show a solid performance through 2011, with GDP growth of 2.8 per cent supported by strength in commodities – coal and copper in particular – and increased shipping activity. Private sector services have started to turn around, and will likely be led by gains in professional and technical services to support the resource sector in 2011.

Alberta is expected to show continued strong economic growth of 3.5 per cent in 2011 after a resource-led rebound in 2010. Further investment in the resource sector will fuel additional gains in the energy, manufacturing and construction sectors.

Saskatchewan is expected to be one of the country’s strongest performers in 2011, with real GDP growth of 3.3 per cent. The recovery is being led by a resurging potash industry, investment in the resource sector, and continued expansion of the province’s service sector – feeding off strong in-migration.

Manitoba’s economy is expected to expand by 2.5 per cent next year, moving slightly above the national average after trailing this year. Growth in 2010 was led by services, most notably the public sector, with an advance in utilities offering some support.

The pace of economic growth in Ontario is moderating after a strong manufacturing-led rebound in late 2009 and early 2010. Growth is expected to shift down from 3.5 per cent in 2010 to 2.0 per cent in 2011. The service sector will anchor most employment gains, with private sector service growth counterbalancing cautious hiring in manufacturing and the public sector.

After a modest setback in 2009 followed by solid growth this year, Quebec is expected to see GDP advance at a more measured pace in 2011, with growth of 1.9 per cent. Investment in mining and manufacturing, as well as hydro will supplement continued infrastructure spending, while private sector service gains will help drive growth during a transitional period for manufacturing.

New Brunswick
New Brunswick is expected to show fairly steady growth of about 2.0 per cent in 2011. While exports have rebounded considerably in 2010, growth is expected to slow until a more pronounced recovery takes hold in the United States. Although the province outperformed most of its Canadian counterparts during the recession, growth will be constrained by weak employment gains over the forecast period.

Nova Scotia
GDP growth of 1.9 per cent is forecast for Nova Scotia for 2011, matching this year’s estimated output advance but lagging most other provinces. After avoiding the worst of the recession, Nova Scotia has seen an uneven recovery in manufacturing and a further, albeit more moderate, decline in its energy sector.

Prince Edward Island
The forecast for Prince Edward Island is for growth of 1.9 per cent in 2011, as potato production picks up, tourism receipts continue to show growth and activity strengthens in the aerospace sector. However, the cancellation of a number of renewable energy projects will temper growth somewhat compared with 2010.

Newfoundland & Labrador
Newfoundland and Labrador will find itself near the top of the pack in terms of GDP growth in 2010-11, with growth of 3.1 per cent in both years. A rebound in commodities, most notably iron-ore and nickel, will help drive the province’s expansion, with support from tourism and strong consumer spending.

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.

For further information:

Alex Koustas, Scotia Economics, (416) 866-4212, [email protected]; Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625, [email protected]

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