Construction activity and the service sector will remain growth engines in 2008 amid weakness in export-oriented manufacturing industries across the provinces, according to Scotia Economics' latest Provincial Trends report.
"A combination of factors, heightened foreign competition, a soaring loonie, and more recently, a weakening U.S. economy, are restraining Canada's overall economic performance, with the manufacturing sector bearing the brunt of the slowdown," says David Hamilton, Economist, Scotiabank. "National output growth is expected to decelerate from an average of 2.6 per cent in 2007 to 1.9 per cent in 2008.
"At the same time, however, non-residential construction and ongoing strength in service industries are providing enough forward momentum across the provinces to offset these headwinds," adds Mr. Hamilton. "Construction activity, in particular, is receiving solid support from both private and public sectors, mainly for spending on infrastructure."
Federal, provincial and municipal governments have announced significant multi-year infrastructure investments. Faced not only with the need to upgrade roads, bridges and water treatment systems, Canada is also challenged by a growing economy and population base. At the provincial level, British Columbia, Ontario and Quebec propose ambitious longer-term transit development. Alberta faces a critical need to upgrade the infrastructure surrounding the oil sands. Quebec is spending a substantial amount on super-hospital projects, as well as investing in power generation and transmission facilities. On the East coast, the Atlantic Gateway initiative aims to increase port activity alongside an improved transportation network.
"Although most provinces are expected to witness some softening in growth in 2008, there will continue to be significant regional disparities between the Western, Central and Atlantic provinces," says Mr. Hamilton.
Regionally, the West will continue to lead with average growth of three per cent, underpinned by the booming energy and mining sectors. Central Canada, mired by weakness in its export-oriented manufacturing sectors, will trail the national average with 1.4 per cent growth in 2008. Similar to the West, average growth of 1.8 per cent in the Atlantic provinces will be supported by the continuing resource boom.
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