TORONTO: 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 Scotia Economics says elevated growth rates have pushed Canada to the top of G7 economic rankings and Canadian output growth is expected to average 3.6% 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, a Scotia Economics economist. “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.”
Here are some highlights:
• BC will see GDP growth of 3.8% this year thanks to turnaround in real estate, commodities and transportation, combined with the boost of the 2010 Winter Olympic Games.
• Alberta will see GDP growth of 4.1% with the revival in resource investment and production spill over to manufacturing and services.
• Saskatchewan’s 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.
• Manitoba’s recovery will be slightly more subdued, with rebounding manufacturing activity contributing to GDP growth of 3.1 per cent.
• Auto production ramped up and employment conditions improved in Ontario. 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.
• Quebec’s 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.
• In the Atlantic provinces, New Brunswick will see 2.3% growth, Nova Scotia 2.2%, PEI 2.3% and Newfoundland and Labrador 3.8%, due in large part to an improved performance in the commodities sector.
Globally, Bank of Canada governor Mark Carney cautions the world is entering an “age of austerity” that will take about $7 trillion out of global output by 2015 and restrain economic growth.
Although Canada will lead the big advanced economies of the Group of Seven in growth over the next two years, he said that may not be saying much.
Carney said said the emerging economies such as China’s are leading the recovery, while the US and Japan are growing modestly and Europe faces possible renewed weakness resulting from the government debt crisis. It will likely lead to higher borrowing costs and more government spending restraint, which unless dealt with properly, could result in a more protracted recovery.
Carney also Canadian corporations must be bold in meeting the challenges of the new economy where two-thirds of growth now resides in emerging economies, not established ones like the US.
Returning to a theme he has voiced in the past, Carney hectored corporate leaders for not investing enough in new equipment to increase their productivity and for not looking beyond the US for new markets.
PLANT, Files from Canadian Press