Provincial economies in for a bumpy ride in the short term
OTTAWA-- Weakening growth in emerging markets, Europe's fiscal and economic woes, and sluggish job creation in the U.S. are weighing on growth in the provincial economies. But despite the global economic uncertainty, The Conference Board of Canada's Provincial Outlook-Summer 2012 forecasts solid growth in Western Canada this year and next. Central and Atlantic Canadian economies will slowly gain traction over the same period.
"For the most part the outlook for the provinces remains positive, despite the bumpy ride in the short term," said Marie Christine Bernard, Associate Director, Provincial Outlook. "Interest in developing natural resources across Canada will provide a solid foundation for job creation and income prospects in the years to come, so that stronger economic growth can be expected next year and in 2014."
The swoon in prices for many commodities in recent months will have an impact on resource sector profits. Most metals and minerals prices, however, remain relatively high — which will continue to drive exploration activity and new mine construction.
The Alberta economic outlook is generally positive — growth of 3.8 per cent in 2012 is forecast, highest among all the provinces. But weak natural gas prices and volatile crude oil prices — particularly the wide spread between Canadian crude and the international benchmark — are leading to uncertainty about future capital spending plans in the energy sector. The Conference Board forecasts that prices will remain sufficiently elevated so that energy sector investment continues to grow strongly in Alberta. In addition, the province has positive outlooks for employment, income growth and consumer spending.
After three poor years for agriculture in Manitoba, a recovery in the sector will help boost overall real gross domestic product (GDP) in the province this year. Stronger growth in the mining, manufacturing and construction industries will also contribute to a gain of 2.9 per cent in 2012. Furthermore, Manitoba's average unemployment rate will edge down from 5.4 per cent in 2011 to 5.2 per cent in 2013.
Cuts in potash production earlier this year will lower Saskatchewan's bottom-line growth to 2.4 percent, half its 2011 growth. But the provincial economy is forecast to lead all provinces in real GDP growth in both 2013 and 2014, thanks in large part to a rebound in the non-metal mining sector.
British Columbia 's forecast is generally positive over the next two years, with real GDP growth of 2.3 percent in 2012 and 2.8 percent in 2013. The mining sector — thanks to increasing unconventional natural gas production — will help offset more moderate export demand for the manufacturing and forestry sectors. Strong employment gains will support the province's domestic economy.
Despite a more pessimistic outlook than previously forecast for its main trading partners, Ontario's economy is holding up fairly well and growth of 2.1 percent is forecast this year. Exports are a bright spot in the outlook, in part due to surging U.S. vehicle sales. As the public sector share of GDP eases slightly, households and businesses will fuel growth this year.
Public sector fiscal restraint and a weakening housing market are among the factors limiting growth in the Quebec economy to 1.4 percent in 2012 and 1.8 percent in 2013. One bright spot is the mining industry, due to a rapid increase in iron ore production along with the development of several new mines. Quebec's overall exports, however, are still not growing strongly.
A turnaround in Prince Edward Island's goods-producing sectors, particularly manufacturing and primary industries, will bring the Island's economy to the front of the pack in the Maritimes with growth of 1.5 percent in 2012. Despite a squeeze in public spending as the provincial government looks to balance its books, a similar outlook is forecast for 2013.
Nova Scotia 's real GDP is forecast to grow by just 1.2 percent this year as weakness in the construction industry, public sector austerity and only a slow comeback in consumer spending is in store for the province. Similarly, New Brunswick's economy is expected to advance by only 0.7 percent this year. Both provinces can expect a better performance in 2013. New Brunswick in particular is forecast to grow by 2 percent in 2013 due to improvement in manufacturing and a major jump in mining production. Real GDP in Nova Scotia is expected to advance by 1.8 percent in 2013.
Newfoundland and Labrador's economy is forecast to gain just 0.7 percent in 2012. Total oil production will decline by 18.5 percent this year, due to maintenance work at the Terra Nova and White Rose offshore petroleum projects. Otherwise, the Newfoundland and Labrador economy is healthy — for example, the construction industry is on pace to expand by 23.5 per cent in 2012.