British Columbia set to lead provinces in economic growth this year
British Columbia's economy is building on the strength of 2014 and is expected to be the only province to advance by more than 3 per cent this year, according to The Conference Board of Canada's Provincial Outlook: Spring 2015.
“While some Western provinces are grappling with weak economic conditions, British Columbia is enjoying a period of strong growth. On the heels of a solid economic performance last year, B.C. is positioned to be the fastest-growing provincial economy this year,” said Marie-Christine Bernard, Associate Director, Provincial Forecast. “The province’s economy will remain strong in 2016, outpacing the national economy.”
- British Columbia will be the only province with economic growth of over 3 per cent in 2015.
- The resale housing market in Vancouver is the hottest in Canada, with solid demand and price increases so far this year.
- There remains considerable uncertainty surrounding the development of the liquefied natural gas (LNG) industry.
- Following growth of 2.6 per cent in 2014, B.C.’s economy is forecast to expand by 3.1 per cent this year and 2.7 per cent in 2016.
- Many of British Columbia’s service industries, as well as manufacturing, are performing well. Exports were up in the first months of the year and should remain strong, as the province’s main trading partners continue to perform well. The province’s housing markets, both new and resale, remain in good shape. In fact, Vancouver’s resale market is the hottest in Canada, with solid demand and price increases so far this year. The strong performance of the housing market is supporting the finance, insurance, and real estate industry, while the strength in exports is fuelling wholesaling and transportation and warehousing.
- While the forecast is generally positive, there are risks to the outlook. Job creation has been muted so far this year, and if this persists over the summer months it could hurt consumer confidence and the domestic economy. In addition, there remains considerable uncertainty surrounding the development of the liquefied natural gas (LNG) industry in the province, due to lower LNG prices in Asian markets. A long-awaited decision by Petronas and its partners on whether to move forward with a $36-billion project is expected this year. If it proceeds, it would be a game changer for British Columbia’s energy sector.
- Ontario’s economy started the year on a soft note, but a strong U.S. economy is expected to spur better gains over the rest of 2015 and in 2016.
- The province’s real GDP is expected to increase by 2.6 per cent in 2015, with growth easing to 2.3 per cent next year.
- Overall, economic growth will be strongest in Central Canada, British Columbia, and Manitoba over the near term, as Alberta and Saskatchewan continue to struggle with the impact of lower oil prices.
- The drop in exports at the beginning of 2015 was caused mainly by a temporary halt in production at the Windsor and Oakville motor vehicle plants. As these plants reopen, international exports will rebound and are expected to grow by a strong 3.9 per cent this year, boosted by a lower Canadian dollar and a U.S. economy that is set to post robust growth.
- A recent announcement by General Motors that it will let go 1,000 workers at its Oshawa plant by the end of the year weakens the manufacturing and exports prospects heading into 2016. Production at the plant will be hurt as assembly of the next-generation Camaro is moved to Michigan.
- Real GDP growth is expected to reach 2.2 per cent in 2015 and 2.6 per cent in 2016—a positive change from the modest 1.3 per cent annual average growth over 2012–14.
- The lower Canadian dollar and a stronger U.S. economy will push Quebec’s exports of goods and services to a new high in 2015 and bolster the manufacturing industry.
- In spite of the ongoing export recovery, businesses are reluctant to invest.
- The weak link in the economy will be private investment. As indicated by The Conference Board of Canada’s most recent business confidence index, the growing pessimism among firms is hurting investment intentions. Housing starts will also plunge this year, leading to only lacklustre growth for the construction industry.
MARITIME PROVINCES HIGHLIGHTS
- Real GDP is expected to advance by 1.5 per cent in Nova Scotia, 2.7 per cent in Prince Edward Island, and 2.3 per cent in New Brunswick in 2015.
- Prince Edward Island’s strong economy and tighter government spending brings it within reach of achieving its goal of fiscal balance for 2015–16.
- New Brunswick and Nova Scotia will overcome their recent economic weakness and post good growth, particularly in the manufacturing sector.
- Nova Scotia’s gains over the next two years will be broad-based, coming from a number of key sectors. The manufacturing sector will benefit from better conditions in the U.S. and from the work getting under way at the Halifax Shipyard on the building of Arctic patrol vessels. Construction on the Nova Centre and King’s Wharf projects in Halifax, combined with an expected rebound in housing starts this year, will keep the province’s construction industry busy over the next two years. However, taking away from growth will be natural gas production, which is expected to decline over the next two years. All in all, real gross domestic product (GDP) in Nova Scotia is forecast to rise by 1.5 per cent in 2015 and 2.1 per cent in 2016.
- The Prince Edward Island economy is performing well. Strength in key industries in the primary, manufacturing, construction, and service sectors will help lift real GDP growth to 2.7 per cent in 2015—better than the national average. The economy will continue to benefit from the lower Canadian dollar and strength in the U.S. economy in 2016, when real GDP growth is expected to advance by 2.1 per cent.
- The economy of New Brunswick is starting to look brighter, with both the goods- and services-producing industries expected to see better growth this year and next. The mining sector will also provide a boost to growth as potash production increases and Trevali’s Caribou mine reopens. The forestry industry will benefit from strength in the U.S. housing market, an increase in the allowable annual softwood cut on Crown land, and the J.D. Irving mill upgrades. Overall, real GDP is expected to advance by 2.3 per cent this year and 2.6 per cent in 2016.
SOURCE Conference Board of Canada