Western Canada driving nation's economic growth, BMO report says
While the Canadian economy continues to grow at a moderate pace, there is a widening gap between commodity-rich Western provinces and the manufacturing-heavy provinces in Central and Atlantic Canada, according to the latest edition of the Provincial Monitor report from BMO Economics.
"The resource sector continues to fuel growth in Western Canada, with Alberta likely to lead the pack in 2012 after posting five per cent real GDP growth last year," said Doug Porter, Deputy Chief Economist, BMO Capital Markets. "Crude bitumen production rose 12 per cent in the province, and job growth is currently the strongest in Canada. Meanwhile, Saskatchewan is also benefiting from rising oil production in the Bakken, and continues to see a very tight labour market and strong population flows. Manitoba’s diverse economy should see above-average growth in 2012."
The report notes that improved U.S. economic momentum since late last year is good news for exporters in Central Canada, but fiscal restraint continues to dampen the medium-term outlook in Ontario and Quebec. "Growth in the central provinces will likely run below two per cent in 2012," stated Porter. "The auto sector is one bright spot, with sales in both Canada and the U.S. showing strong momentum, and production climbing back to pre-crisis levels. But a rising tax burden will continue to weigh on growth in Quebec, and spending restraint will begin to bite in Ontario as the Province grapples with a near-$15-billion deficit."
In Atlantic Canada, modest U.S. economic growth, a strong loonie and fading public-sector capital spending will mean lower growth in Atlantic Canada this year, with all provinces in the region at or below two per cent. "While preparatory work for Nova Scotia’s $25 billion Federal shipbuilding contract is underway, growth likely won’t get a significant boost until 2013," noted Porter. "Meantime, Newfoundland & Labrador, the region’s recent growth leader, is likely to see offshore oil production drop in 2012 amid maintenance shutdowns and gradually falling output-broader domestic demand, however, should remain solid."
"Despite some clear regional differences, Canadian businesses are demonstrating their remarkable adaptability by diversifying their supply chains, opening-up new markets for their products and services, and by making critical investments in their companies," said Cathy Pin, Vice-President, BMO Commercial Banking. "This year we are also seeing many businesses beginning to look for opportunities to strengthen their financial underpinnings and competitive positioning, by taking greater advantage of available cash flow management tools and strategies."
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.