Provincial economies a mixed bag due to housing market, commodity price slump

While most provinces are expected to see decent economic growth this year, some are still struggling to overcome commodity price slumps, according to the Conference Board of Canada’s Provincial Outlook. For instance, while British Columbia’s economy continues to boom thanks to the housing market, Alberta continues to deal with its worst economic downturn in three decades.

Highlights
Alberta: The province is dealing with the worst economic downturn in 30 years, and will be facing another year of recession. “Nearly all sectors of the economy are struggling and, if that was not enough, the wildfires in northern Alberta have added to the economic woes of the province,” said Marie-Christine Bernard, associate director, Provincial Forecast. “Wildfires in Northern Alberta temporarily shut crude oil production from the oil stands and hampered economic activity in the region. The good news is that oil prices are improving and a recovery is forecast for the province next year.”

• Real GDP is expected to contract by 2% in 2016, but return to positive territory next year with a 2.5% gain.
• The commodity price slump will continue to impact the economy.

British Columbia: The continued housing boom will be one of the main drivers of BC economic growth in 2016. “British Columbia's economy has been growing by 3 per cent since 2014 and this positive outlook is expected to continue for the foreseeable future,” Bernard said. “Strength in forestry, construction, transportation and the real estate industry put the province in an enviable position as Canada's economic growth leader.”

• British Columbia’s economy is projected to outperform all other provinces this year, with a real GDP growth of 3% in 2016 and an equal gain in 2017.
• Along with Ontario, Manitoba and PEI, BC is one of only four provinces projected to see real GDP growth above 2% this year.

Manitoba: Strong employment and wage gains are driving a good pace of growth in the province. “With real GDP set to expand above the national average this year, Manitoba will continue to be a reliable source of growth in Canada,” Bernard said. “Services will see healthy increases as Manitobans are on a spending spree due to strong employment and wage gains from recent years.”

• Real GDP is expected to grow by 2.1% in 2016 and 2.6% in 2017.
• The balance of growth will shift this year from the goods-producing sector to the services sector.

Maritime Provinces: Prince Edward Island and Nova Scotia should see solid growth this year, while New Brunswick’s economy is expected to contract. “Strength in P.E.I. and Nova Scotia's construction and manufacturing industries are supporting solid economic growth in both provinces,” Bernard said. “New Brunswick, on the other hand, is facing many challenges, including a steep decline in mining output, which is forecast to fall by almost half this year.”

• PEI and Nova Scotia are projected to see real GDP growth of 2.3% and 1.5%, respectively.
• New Brunswick’s economy is projected to contract by 0.4% this year.

Newfoundland and Labrador: Newfoundland and Labrador is facing weak economic growth, and is the only province projected to face a recession next year. “Along with the downturn in the resources sector, Newfoundland and Labrador is facing tax hikes and government cuts that will considerably dampen the economic outlook over the next two years,” Bernard said.

• Real GDP is expected to expand by just 0.2% in 2016.
• The commodity price slump will continue to be a drag on the economy

Ontario: The province is poised for strong growth this year, driven in part by a strong pace for exports. “Unlike other provinces more dependent on natural resources, Ontario is benefitting from favourable terms of trade that improve the competitiveness of Canadian goods and services on international markets,” Bernard said. “The province is on much stronger ground, with job creation fuelling consumer demand and a pickup in exports helping to bolster economic growth.”

• Real GDP is projected to increase by 2.8% in 2016 and 2.6% in 2017.
• Employment growth is running at twice the pace of the national average.
• Consumer demand for durable and semi-durable goods is expected to boost real household consumption by 3.2% this year.

Quebec: The province’s economy is projected to pick up over the near term. “Quebec's economy seems to be slowly gaining momentum,” Bernard said. “The improvement in real GDP growth will rest on Quebec consumers' shoulders, as household consumption is projected to benefit from sound job creation, stronger wage increases, and federal fiscal stimulus.”

• Real GDP is forecast to grow by 1.8% this year, driven by strong job creation, wage increases and federal fiscal stimulus.
• The services industries are expected to grow by 2.1% in 2016.

Saskatchewan: The province will manage to exit recession this year, but the economy remains weak. “Saskatchewan’s economy will narrowly avoid recession this year. The province’s minung sector continues to suffer from lower oil, uranium and potash process, while the job market has been shedding jobs and consumers are reluctant to open their wallets,” Bernard said. “A modest pickup in economic growth is in sight for next year as conditions in the energy sector stabilize.”

• Real GDP growth is forecast at just 0.2% for 2016.
• The commodity slump will continue to impact the economy

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RBC forecasts lower growth for 2016