Briefing highlights
- Provincial economic outlooks
- Global markets sinking so far
- TSX, Canadian dollar at a glance
- U.S. markets closed
- Telecom, TV complaints at record
- Current account deficit widens
- Required Reading
Provincial outlooks
Economically speaking, British Columbia is killing it, and has been for some time.
Alberta is pushing it, with better times expected. Quebec is botching it via lower immigration targets. And Ontario is just plain losing it.
That’s what you can glean from the latest outlook by the Conference Board of Canada, though the group certainly didn’t phrase things in those terms.
“Despite the outlook for better growth ahead, overall economic gains are expected to remain rather weak in the Canadian economy over the next few months and this will spur a rate cut by the Bank of Canada early next year,” associate director Alicia Macdonald said in the report, projecting growth of 1.6 per cent this year, and 1.8 per cent next.
“While the economy will benefit from a bit more monetary stimulus, we’ll see less expansionary fiscal policy as many provincial governments look to curb their spending growth.”
Bank of Montreal also released its look at the provinces this week, noting the political and fiscal shifts across the country.
“Fundamentally, the biggest picture at the provincial level is that most jurisdictions have tacked to the political and fiscal right, even as the federal election result will arguably shift policy further to the left,” said BMO senior economist Robert Kavcic.
“All told, a provincial fiscal policy shift toward restraint, in exchange for some early tax relief, will serve to counter some of the shift expected at the federal level,” he added.
Here’s what The Conference Board projects for the provinces this year:
Source: The Conference Board of Canada
Of course, the economic order across the country would shift in 2020, looking like this, according to the group:
Source: The Conference Board of Canada
Here’s how The Conference Board and BMO see individual provinces:
British Columbia: Humming along
Conference Board: “The province will remain among the provincial growth leaders in the next two years. A key reason for the continued strong growth is the province’s non-residential investment outlook. Construction of the LNG Canada liquefied natural gas terminal and pipeline, and the beginning of the Trans Mountain Pipeline expansion project, will keep the province’s economy humming along over the next two years.”
BMO: “British Columbia’s economy has moderated this year as the housing market slowed, with real GDP on pace for 1.8-per-cent growth. With housing now turning up, growth should pick up to 2.2 per cent in 2020 to lead the country.”
Alberta: Changing landscape
Conference Board: “[The Trans Mountain expansion project] will change the landscape of the energy sector over the next five years, temporarily creating a significant net-positive takeaway capacity for oil producers and incentivizing expansions and new projects. The new provincial government is looking to balance the books by 2023, and that means stringent spending guidance moving forward, which will weigh on public sector output.”
BMO: “Mandated oil production cuts have weighed on output this year, though the curbs have been rolled back to 125,000 barrels per day as of Sept. 1 from as much as 325,000 barrels per day. This will help 2020 real GDP rebound 2 per cent. Longer term with oil sands production still on the rise, limited pipeline capacity will remain a pressing issue.”
Saskatchewan: Mild recession
Conference Board: “Saskatchewan has slipped into a mild recession this year. Although the 2019 outlook for agriculture and mineral fuels has improved slightly since our last forecast, the primary sector will remain a drag on economic activity in the province. Economic growth will also be negatively impacted by the winding down of major construction projects, which will naturally result in lower levels of capital spending.… The Saskatchewan economy will turn around in 2021 on the back of stronger exports.”
BMO: “The oil sector has been retrenching, but the province expects relatively stable production over the near term. Capital investment, however, looks to be down this year. Potash production is rising at a steady clip, but trade tensions with China and a November rail strike have negatively impacted the farm sector.”
Manitoba: Not yet, but soon
Conference Board: “Manitoba’s economic growth is expected to be soft in 2019 and 2020 due to temporary factors. Declines in business investment and subdued growth in the manufacturing sector are expected to drag on real GDP growth. Indeed, construction activity is projected to edge down by more than 3 per cent in 2019 and 2020 as major construction projects in the province reach completion.… The economic outlook for Manitoba over the medium term is much brighter.”
BMO: “Manitoba continues to grow at a steady pace … The diverse manufacturing base and sturdy service sector continue to churn out some of the steadiest growth in Canada, which is often the norm.”
Ontario: Drivers weakening
Conference Board: “Most of the domestic demand factors, such as household spending and residential investment, that underpinned the province’s strong performance over 2014–18 have begun to weaken, which is behind the softer outlook over the near term.… While export growth will remain decent in 2019, Ontario’s trade outlook will be challenged over the near term." Economies of both the U.S. and the U.K. – Ontario’s largest export markets – are slowing, "which will restrain the province’s exports and overall economic growth.”
BMO: “Ontario’s economy has moderated after a powerful run. Real GDP is expected to grow 1.7 per cent this year, down from 2.2 per cent in 2018 and 2.9 per cent in 2017. This reflects a return to potential growth for the province, with a steady 1.8 per cent expected in 2020.”
Quebec: Immigration targets to limit growth
Conference Board: “Recent changes to immigration policy will lead to much softer population growth in the province starting next year, translating into slower growth in household demand…. Population growth is set to cool over the next few years as immigration targets are reduced significantly. Not only is population growth slowing, but the province’s population is aging…. These factors will limit labour force growth going forward and will exacerbate labour shortages in the short run. Over all, this weaker labour force growth will limit the province’s potential output, which will constrain real economic growth moving forward.”
BMO: “Quebec’s economy remains strong, and has experienced its best performance in 15 years. Real GDP is expected to grow 2.3 per cent this year, the strongest in Canada, before cooling to 1.7 per cent in 2020. While slowing, this is still a solid growth rate for the province, and overall conditions remain supportive for employment, investment and real estate.”
New Brunswick: Consistently mild
Conference Board: “New Brunswick’s economy is set to grow at a consistent but mild pace over the next five years. With no major projects on the horizon, fiscal prudence a key pillar of the Higgs administration, and slowing population growth, the province is in for a period of weak growth.”
BMO: “Capital spending has retrenched recently as some major projects have wound down in the forestry and refining sectors. Forestry exports have firmed alongside improved momentum in U.S. housing, thanks in part to a plunge in long-term interest rates.”
Nova Scotia: Immigration buoys economy
Conference Board: “The positive outlook is being driven by the influx of immigrants to the province in 2018, and again this year, which is helping to buoy household demand and fill labour shortages. Stronger population growth in the province will continue to provide a base of support for consumer spending and residential construction activities over the near term.”
BMO: “The Halifax Shipyard is busy building combat ships for the Royal Canadian Navy (through 2030). Other major capital projects, such as the Nova Centre and Maritime Link, have also supported growth recently, but their contributions have begun to fade – capital spending is expected to fall modestly this year. Residential construction has been strong, with the number of units under construction in Halifax at a record high.”
Prince Edward Island: Hot streak
Conference Board: “The economic hot streak will continue for Prince Edward Island in 2020, with growth expected to outpace the Canadian economy for a fifth year in a row. Underpinning this feat are solid population gains. A sustained influx of international immigrants has made the island the fastest-growing province in the country.... The population gains are having multiple knock-on effects throughout the provincial economy.”
BMO: “The P.E.I. economy has run at a very solid pace, but real GDP growth will likely moderate to 1.4 per cent this year and 1 per cent in 2020. Strong tourism activity, a population boost and less fiscal restraint should keep the economy performing well.”
Newfoundland and Labrador: Oil and gas boom
Conference Board: “Newfoundland and Labrador’s economy is expected to grow by 4.5 per cent this year, its strongest performance since 2013. The solid growth this year is underpinned by unexpectedly strong gains in the oil and gas industry, mainly owing to a 60-per-cent surge in the production of heavy crude oil in Hebron’s offshore oil platform.”
BMO: “The oil sector makes up roughly 20 per cent of GDP and 7 per cent of employment, and the recent cycle in oil prices has impacted incomes. Production has faded after peaking in 2007, but Hebron began producing late in 2017, and should ramp up to 150,000 barrels per day over the coming years. Longer-term potential in the sector is solid, but near-term capital investment is facing a lull, with other projects such as Muskrat Falls also winding down.”
Markets at a glance
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How the labour market looks
The Globe and Mail’s Matt Lundy looks at reports on the jobs market to see where things stand.
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Complaints rise
The number of complaints that Canadians lodged with the federal telecom and television ombudsman climbed 35 per cent to an all-time high, with issues around wireless service drawing the bulk of the gripes, The Globe and Mail’s Alexandra Posadzki reports.
The federal Commissioner for Complaints for Telecommunications Services said that, for the 12-month period ended July 31, customers submitted nearly 19,300 complaints about their telecom and TV providers.
That’s the highest number of complaints that the organization has seen in its 12-year history.
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Current account gap widens
Canada’s current account deficit swelled by $3.1-billion in the third quarter, hitting $9.9-billion after a sizeable pullback in the second.
The total deficit on goods and services trade alone climbed $2.4-billion, Statistics Canada said.
“Another quarter, and another quarter of red ink in Canada's current account,” said CIBC World Markets chief economist Avery Shenfeld.
“The outcome is still a bit better than what we saw after oil prices crashed in late 2014, but softer energy prices also played a role in the quarter-to-quarter widening in Q3,” he added.
“There was a small improvement in the deficit on services and little change in the investment income flows. Over all, not a market mover on the day the US is closed, but a reminder that trade and current account fundamentals are still a negative for the Canadian dollar’s prospects.”
Ticker
Pound rises on poll
From Reuters: Sterling briefly touched near seven-month highs against the euro and rose against the U.S. dollar after a poll suggested Britain’s governing Conservative Party would win a comfortable majority in the Dec. 12 election.
Swiss economy outpaces euro zone
From Reuters: Rising output from Switzerland’s flagship pharmaceuticals industry and production of hydroelectric power helped the Swiss economy grow faster than the neighbouring euro zone in the third quarter, masking a slowdown in other parts of the economy. Swiss GDP increased by 0.4 per cent from the second quarter, the State Secretariat for Economic Affairs said.
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