Modest economic growth for Quebec in 2006, says RBC Economics

Quebec's economy is expected to grow by a modest 2.7 per cent in 2006 and 2.4 per cent in 2007, according to the latest provincial economic outlook released today by RBC Financial Group.

"Quebec's economic growth continues to underperform relative to the national average," said John Anania, assistant chief economist, RBC. "Several factors are weighing down growth, including ongoing challenges in the manufacturing sector and weaker-than-average investment prospects."

RBC notes that investments in Quebec appear to be lagging, as it trails the nation's average in private and public investment in structures and equipment. A recent Statistics Canada survey of investment intentions predicts weakness in Quebec's private construction spending, which is expected to decline by 2.4 per cent compared to an increase of 6.1 per cent for the rest of Canada.

According to the report, Quebec's export driven manufacturing sector will continue to face the challenging conditions of a strong Canadian dollar, elevated energy prices, intense foreign competition and a forestry and wood products sector vulnerable to a slowdown in U.S. demand.

While growth in manufacturing shipments and wholesale trade softened in 2005, RBC notes that they remain in positive territory. Despite significant cooling in housing starts, which is likely to continue in 2006, several hydro and aluminum smelter projects are underway and will provide modest support to non-residential construction. Retail sales were up six per cent in 2005 and should remain strong this year.

Across Canada, there are a number of marked regional differences as economic growth drivers are shifting. Newfoundland and Labrador will be the provincial growth leader this year with Alberta close behind and expected to reclaim the top spot among all provinces in 2007. Overall, the strongest economies will be west of the Manitoba-Ontario border.

The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, personal income growth, retail sales, housing starts and the Consumer Price Index.

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For further information: please contact: John Anania, RBC Economics, (416) 974-7231; Claude Lussier, RBC Media Relations, (514) 874-5919;

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