By Marie-Christine Bernard, Associate Director, Provincial Forecast, The Conference Board of Canada
Canada’s economy underperformed in the first part of 2015. A lot of the weakness in the Canadian economy is due to the correction in the energy sector, but economic growth outside the energy sector has been slow to pick up. With Alberta’s economy not performing well, due to the lower oil prices, all eyes are on Central Canada where a lower Canadian dollar and the anticipated improvements in economic conditions south of the border were expected to revive growth in the Ontario and Quebec economy. But, more than midway through the year, economic forecasts are being revised down for nearly all provinces. Central Canada’s economic rebound will be more moderate than first envisioned as exports have been slow to accelerate. A host of factors, have plagued exporters in Canada’s manufacturing heartland, most notably the absence of spare capacity to meet new export orders.
Difficulties in the oil sector are hitting the Alberta, Saskatchewan, and Newfoundland and Labrador economies hard. Troubles never seem to come alone; very dry weather conditions out west will also hamper prospects for a better harvest, which will also impact economic growth. The metal mining sector is also experiencing some turbulence as the end of the commodity boom rattles growth prospects going forward. Meanwhile, business investment in general remains depressed so far this year.
Although current economic conditions are far from stellar and are only slowly improving in Central and Atlantic Canada, the Conference Board expects economic performance to pick up in the second half of the year. We foresee more normal economic performance in most of the provinces over the rest of the year and in 2016, as economic conditions stabilize in Western Canada and the strengthening U.S. economy helps improve the trade outlook for Central Canada.
Regionally, British Columbia, Manitoba, Prince Edward Island, and Ontario will be the leaders in real GDP Growth in 2015 and the only provinces with growth of two percent or more.
Natural Gas Production Weighs Down Nova Scotia’s Growth in 2015
Nova Scotia’s economy is still struggling to gain momentum and economic growth and will be weaker this year than last. The new natural gas production from Encana’s Deep Panuke offshore field was supposed to boost economic growth, but difficulties have hampered production to date as well as the production capacity of the field; this is weighing on the province’s economic growth.
Aside from the petroleum industry, the economy appears to be gaining traction, mainly in the manufacturing and construction industries. However, the province has been unable to reverse a two-year trend in job creation and the job market will fail to generate any new jobs once again in 2015. The numbers are probably influenced by the downturn in the energy sector in the West; rotational workers who have lost their jobs there are counted in the workforce of their province of origin. Nevertheless, with work getting under way on the Arctic patrol vessels at Irving’s newly-expanded shipyard this fall, the economy should see real GDP growth accelerate from just 1.3 percent in 2015 to 2.5 percent in 2016.
New Brunswick’s Economic Outlook Improves
In New Brunswick, the economic outlook is modest but much better than in recent years. Recovery in the job market remains elusive but a number of industries—such as manufacturing and the forestry and mining sectors—are facing better growth prospects. Potash mining will continue to ramp up at the Picadilly mine, while mental mining will benefit from the reopening of the Trevali’s Caribou mine. Manufacturing is expected to post solid gains over the next two years as stronger economic growth in the U.S. helps drive demand for New Brunswick-produced goods, and a weaker Canadian dollar makes them more price competitive. The forestry industry will benefit from an increase in the allowable softwood cut on Crown land and stronger growth in new housing demand in the U.S. In turn, the more upbeat performance of the goods-producing sector will help support growth in the services sector. New Brunswick’s real GDP, after experiencing declines since 2011, is forecast to gain 1.4 percent this year and 2 percent in 2016.
Exports Not Yet Boosting Ontario’s Economy
In Ontario, the economy got off to a slow start this year as real exports fell two percent in the first quarter and may contract in the second quarter as well. Ontario’s disappointing trade performance will moderate the province’s overall economic growth projections in 2015, but to a still-healthy two percent. Most of this growth will be concentrated in the second half of the year.
The positive momentum will carry over to 2016 when real GDP is forecast to expand by 2.3 percent. While the trade sector has faced challenges, the domestic economy in general is holding strong. Consumer spending will benefit from sound job creation and stronger growth in household disposable income. The housing sector (both new and resale markets) remains very strong, but there are growing concerns of overbuilding in Toronto’s condo market.
Weather Woes Adding to a Difficult Year for Saskatchewan
Saskatchewan, along with Alberta, will face a contraction in real GDP this year. The ongoing correction in oil prices has hurt the provincial economy and drought conditions are further weighing down performance in the agriculture sector. Overall, real GDP is expected to contract by 0.2 percent in 2015, but the decline in real GDP could be steeper if the wheat harvest is more affected by drought conditions.
The outlook for Saskatchewan should be stronger next year. Oil prices should stabilize and begin to recover while uranium and potash production is expected to continue to increase. Construction is also expected to pick up again in 2016, along with projects in the mining and energy sectors. Saskatchewan’s economy is projected to rebound by 2.6 percent in 2016.
Bio: Marie-Christine is presently in charge of the medium and long-term provincial forecast and publication as well as the bi-annual territorial forecast and publication. She also works on financed research projects and prepares alternative scenarios to the provincial forecast.