A tale of 10 provinces

The regional disparities that have been evident in the Canadian economy over the past few years will continue in 2009. However, the gap has narrowed as no province will go unscathed in the current economic reality.

British Columbia

The BC economy softened in 2008, with the lumber and forestry industries continuing to be a drag on overall growth prospects. The BC economy expanded by 1.2% in 2008 and similar meager growth is forecast for 2009, at 2.1%. The build-up to the 2010 Winter Olympics continues to be a catalyst for non-residential growth in the Province, along with natural gas development, offsetting a weakening housing market. According to CMHC, housing starts declined by close 9% in 2008 and forecast to decline 18.4% in 2009.

Employment growth will slow in 2009 as the unemployment rate creeps up to 4.4%. Retail sales increased a mere 3.0% over 2007, as slowing employment and wage gains had a subtle impact on consumer confidence.

Alberta

The bloom is off the rose in 'wildrose' country as growth prospects moderated in 2008 to more sustainable levels. The economy shifted gears, expanding by a moderate 2.2% in 2008 as a result of capacity constraints. The decline in energy prices experienced in the latter half of 2008 pose a downside risk to the 2009 growth forecast, which pegs Alberta at 3.0%.

According to CMHC, total starts were down 50% in 2008, as activity levels and cost of living became unsustainable; however, Alberta continues to lead the country in residential construction activity. Non-residential construction activity also experienced a pull-back towards the end of 2008.

Alberta experienced, for the first time in a decade, net out-migration. Retail sales slowed as consumers retrenched, particularly for big-ticket items. The unemployment rate remained the lowest in the country at 3.5% but is expected to increase to 4.1% in 2009.

Saskatchewan

Saskatchewan took over top spot on the growth charts for 2008 but can this momentum last through 2009? The economy expanded by 3.9% in 2008 and is forecast to see growth of 3.5% in 2009. Saskatchewan’s commodity boom has been driving investment in the province. In addition, an anticipated income tax cut in 2009 should continue to bolster retail sales.

Saskatchewan is directly benefiting from out-migration from Alberta, with population growth the highest seen since the 1970’s. The housing market reached new highs in 2008 but a slight pull back is expected for 2009 as the effects of price escalations are felt by the consumer.

Manitoba

Manitoba experienced another solid growth year. The economy expanded by 3.1% in 2008 and is forecast to post growth of 2.3% in 2009. The diversification of Manitoba’s manufacturing sector and the strong resource presence have helped to shelter the province somewhat to the overall economic conditions. Unemployment reached a low of 4.2% in 2008 and is expected to remain in that range for 2009, which should continue to fuel retail sales.

Housing starts hit a 20 year high in 2007 and kept reasonable pace in 2008 but ended the year down 7.5% mostly due to declines in multi-family starts.

Ontario

From “have” to “have not”? Close manufacturing ties to US demand certainly played a role in the economic malaise plaguing Ontario as it flirted with a technical recession in 2008. Domestic demand and service sector growth have been buffering the impact of the manufacturing sector but can these continue to carry the weight in 2009 given challenges of their own? The economy showed no real growth in 2008 and is forecast to record growth of a mere 0.4% in 2009.

The residential market cooled slightly in 2008 on the single detached front but remained positive overall based on strong multi-family starts. Continued cooling is expected in 2009. Existing home sales are also expected to trend downwards.

Unemployment edged upwards to 6.5% and is expected to continue to edge upwards in 2009.

Quebec

Like Ontario, Quebec flirted with a technical recession in 2008. While less tied to the US economy due to a more broad-based manufacturing sector, Quebec exports still have strong links to the US consumer. The economy expanded by 0.7% in 2008 and is forecast to rebound to a mere 1.2% growth for 2009. Consumer and government expenditure have been shoring up weakness in other areas of the economy.

According to CMHC, new home construction will continue to moderate in 2009 in line with household formation. The unemployment rate increased to 7.5% in 2008 and will continue to rise in 2009. This will be a drag on consumer demand and retail sales growth in the province.

New Brunswick

Investment spending in the province bolstered growth in 2008 as the economy expanded by 2.0%. Resource development was a key driver in this growth and will continue to impact growth prospects over the near term. Forecast expansion of 2.5% in 2009 will be impacted by any further softening in resource pricing.

Unemployment hit 8.6% in 2008, healthy for the province amid skilled labour constraints for the number of projects underway. Population growth increased with net in-migration to the province fuelling demand for housing, but, this growth likely peaked in 2008.

Nova Scotia

The economy of Nova Scotia benefited as an energy-producing province in 2008 but what effect will softening energy prices have for 2009? The economy expanded by 2.0% in 2008 and similar growth levels are forecasted for 2009.

Unemployment dipped to 7.7% in 2008 and is expected to trend upwards to 8.0% for 2009. Consumers benefited from income gains, reflected in retail sales which were up 5.5% over 2007.

Prince Edward Island

The tourism sector continued to feel the impact of the sluggish US economy. PEI’s economy expanded by 1.9% in 2008 and is expected to soften further in 2009, recording 1.4% growth as momentum in the province slows. Despite this, labour markets remained resilient as the unemployment rate continued to hover at 10.4%.

Housing starts trended down in 2008 and this trend is expected again in 2009.

Newfoundland & Labrador

Economic growth continues to be driven by the energy sector; however, declines in prices and production will have a significant impact on the growth forecast for the province. The economy expanded by 0.2% in 2008 and is expected to expand by 1.3% in 2009. After 15 years of decline, the population of Newfoundland & Labrador rose in 2008, stimulating consumer spending and housing demand in the province. Housing starts increased by 17% in 2008, marking the second year of positive activity. Starts are forecast to moderate in 2009 as population growth levels off once again.

The unemployment rate dipped to a below average rate of 13.1% in 2008 and is expected to dip further in 2009 before leveling off.