TD Economics @TD_Economics http://economics.td.com • As we had anticipated, economic growth in most regions has been gaining some traction of late after a challenging start to the year. For the full year, growth is expected to run from a low of 0.5% in Alberta and New Brunswick to 2% in Prince Edward Island. ese modest rates are largely unchanged from our March forecast. • Underlying this subdued picture for output and spending is surprising strength in job markets. Even with an assumed normalization in hiring trends going forward, job growth forecasts have been upgraded this year in eight of ten prov- inces, notably in Ontario and British Columbia. Ongoing resilience in job markets, alongside a recent reduction in bor- rowing rates, is expected to support continued household spending gains from coast to coast over the forecast period. • B.C.’s economy and job market are still expected to advance this year despite a deep slowdown in housing activity.We look for stabilization in home sales during the second half of 2019, with prices likely to reach a bottom during 2020. Continued solid prospects for non-residential investment should provide some offset to weakness on the residential side. • Alberta’s economy is expected to eke out minimal expansion this year, before recording a slight acceleration in 2020. Mandated oil production curtailment so far this year has yielded stronger bitumen prices. However, business and house- hold spending remain hampered by concerns around medium-term energy investment. Likewise, the Manitoba and Saskatchewan economies are encountering growth-limiting headwinds, notably soft global agriculture conditions and slowing population growth. As these pressures ease next year, growth should pick up closer to trend. • On the heels of a growth downshift since mid-2018, economic “green shoots” have been evident of late in Ontario and Quebec. Of the two, Quebec would appear to enjoy the growth edge, owing in part to fiscal stimulus and strong housing momentum. Ontario’s fiscal picture remains chal- lenging, with government spending restraint set to weigh on its near-term economic performance. • Growth in the Atlantic region for this year is largely un- changed from our March view. PEI is likely to chalk up an- other solid year for growth, while Newfoundland & Labra- dor records an improvement from its tepid 2018 rate. More modest growth performances are expected for New Bruns- wick and Nova Scotia. Economic Growth and Job Markets Diverge in 2019 June 17, 2019 Provincial Economic Forecast Jump to: BC | AB | SK | MB | ON | QC | NB | NS | PE | NL | Forecast Tables For more details on our national forecast see our Quarterly Economic Forecast Contributing Authors ■ Omar Abdelrahman, Economist | 416-734-2873 ■ Rishi Sondhi, Economist | 416-983-8806 ■ Beata Caranci, Chief Economist | 416-982-8067 ■ Derek Burleton, Deputy Chief Economist | 416-982-2514
• Ontheheelsofagrowthdownshift sincemid-2018,economic“greenshoots”havebeenevidentof late inOntarioand Quebec. Of the two, Quebec would appear to enjoythegrowthedge,owinginparttofiscalstimulusandstronghousingmomentum.Ontario’s fiscal picture remains chal-lenging,withgovernmentspendingrestraintsettoweighonitsnear-termeconomicperformance.
• Growth in theAtlantic region for this year is largely un-changedfromourMarchview.PEIislikelytochalkupan-othersolidyearforgrowth,whileNewfoundland&Labra-dorrecordsanimprovementfromitstepid2018rate.MoremodestgrowthperformancesareexpectedforNewBruns-wickandNovaScotia.
Economic Growth and Job Markets Diverge in 2019June 17, 2019
Provincial Economic Forecast
Jump to: BC | AB | SK | MB | ON | QC | NB | NS | PE | NL | Forecast Tables
For more details on our national forecast see our Quarterly Economic Forecast
British ColumbiaWhilerealGDPgrowthinB.C.moderated in2018, theestimatedgainof2.4%outstrippedthenationalaverageforthefifth straight year.A surge innatural gasoutput androbust expansion in residential and non-residential con-structionand transportation&warehousingactivitypro-pelled lastyear’sadvance.Lookingahead,weanticipateafurtherslowdowntoabelow-trendratein2019,largelyonthebackoftherecentslumpinhousingactivity.Providedthathousinggainssometractionin2020–asweexpect–economicgrowthshouldregainsomemomentum.
Theadjustmentunderwayintheprovince’shousingmar-kets to both government policy changes and higher in-terest ratesover thepast fewyearshasbeen sharper andmoreprolongedthanwehadanticipated.Declines inre-saleactivity (Chart1)andaveragepricesaccelerated thisyear,while themarket balance in theGreaterVancouverAreahassunkenwellintobuyer’sterritory.Thatsaid,withmuchofthespeculativefrothhavingbeenremovedfromthemarketandinterestratetrendsrecentlyturningmorefavourable,salesare likelytobeginfirminginthesecondhalfoftheyear.Still,someresidualsoftnessinhomepricesandhomebuildingisexpectedtolingerinto2020.
A key factor that has helped insulate the economy fromthespill-overimpactsofdeclininghousingactivityison-goingresilienceinlabourmarkets.Theprovincemaintainsthecountry’slowestunemploymentrateandahistorically-highcoreageparticipationrate.Byanymeasure,employ-mentinB.C.isgrowingatanunsustainablyrapidclipthisyear,settingthestageforasignificantmoderationin2020.
Meanwhile, prospects for engineering and non-residentialinvestmentremainbright.AsmeasuredbyStatCan’sCapi-talandRepairExpendituresSurvey,B.C.toppedthenation(Chart 2). Large scale projects, including LNG Canada,theassociatedpipelinewillhelp to sustainnon-residentialconstructiongoingforward.Alate-2018surgeinnon-resi-dentialbuildingpermitsfurtherconfirmsthisnarrative.Ad-ditionally, labourmarkettightnessandanabsense inspareproductivecapacity is likely to incentivize investment.Butwhile the outlook for non-residential investment remainsstrongforthemostpart,oneareaofnear-termdownsiderisksurrounds the export sector,which is expected to struggleamidweakconditionsintheforestrysector,aslowingChi-neseeconomy,andgrowingtradetensions.
AlbertaAlberta’s2019growthprospectsweredealtasevereblowlate lastyearbyextremesoftness inheavyoilprices.Thegood news is that the mandated oil output curtailmenthas secured a sustained improvement inheavy oil prices(Chart1).Still, investmentandspendingintheprovincehavebeenslowtorespond(Chart2).Weanticipateamod-eratereboundinrealGDPgrowthin2020,butthosegainswilllikelybenarrowlyconcentratedinoiloutput,belyingcontinuedweaknessinthebroadereconomy.
Despite an easing in oil output restrictions in recentmonths, near-term risks surrounding prices are tilted tothedownside.Globally,pricebenchmarkshaveweakenedsinceMay, reflecting an escalation in trade tensions andoversupply concerns. In response,wehavenudgeddownour2019and2020WTIpriceoutlook.WithintheAlber-taoilpatch,elevatedstockpilesofcrudehavebeenslowtoworkdownamidanunexpectedsofteninginexportsandcrude-by-rail shipments inQ1.Fortunately,exportshaveshownsignsofstrengthening,bodingwellforarebalanc-ingheadinginto2020.
The environment for oilpatch investment is likely to re-mainchallenging.Furtherregulatorysetbacksandadelaytothestart-upofoperationsonLine3hasonlycloudedtheoutlookfurther.Petroleumandchemicalmanufactur-ingremainsoneareaofexpansionandprovidesopportuni-tiesforlonger-termdiversification.
Theprovince’s labourmarketshaveweathered the recentgrowthslumpbetterthanexpected.Atthesametime,thisyear’ssteadyemploymentpicturesuggeststhatanyreboundontapnextyearwillbemodestatbest.Inturn,consumersarelikelytoremaincautioustospend,whiletheprovince’shousingmarketscontinuetostruggleamidcontinuedex-cesssupply.Ontheplusside,abouncebackinhomeresaleactivitythisspringprovidessomeearlyhintsthathousingdemandisbeginningtoturnthecorner.
The newly-elected governmentwill table its first budgetin theautumn,witha cut to corporate taxes alreadyan-nounced.However,onechallengingtaskwillbe tomakegoodonitsgoaltoslaytheestimated$6.9billionprovin-cialdeficitbyFY2022-23,ayearearlierthanpromisedbythepreviousgovernment.Afreezetooperatingexpensesmaybeon the table since itwas implied in thegovern-ment’selectionplatform.
2018 2019 2020
Real GDP 2.0 0.5 2.1
Nominal GDP 3.5 1.9 4.8
Employment 1.9 0.6 1.2
Unemployment Rate (%) 6.6 6.8 6.7
Housing Starts (000's) 26.3 23.4 25.7
Existing Home Prices -2.4 -3.3 0.0
Home Sales -7.2 2.3 10.0
[ Annual average % change, unless otherwise noted ]
Alberta Economic Forecasts
Source: Statistics Canada, CMHC, CREA, Forecast by TD Economics
Improvedheavyoilpricing so far this yearhasbeen sup-portingcashflowsintheoilpatch,thoughrecentdeclinesin global benchmarks partly on the back of tariffworrieshavemutedsomeofthebenefits.Theprovincehasnotex-perienced the sameproductionconstraintsas itsneighbortothewest.Thatsaid,outputandinvestmentprospectswillcontinuetobe impededbyelevateduncertainty,especiallysurroundingmarketaccess.
Theprovince’sagriculturalsectorischallengedbyanumberofheadwinds ranging fromweak croppricing tonew re-strictionsoncanolaseedexportsintoChina(Chart1).Lastyear,asurgeinfarm-relatedexpensesincludingfeed,debt,andenergycostsdrovea42%dropinnetincome.Expensegrowthisexpectedtoleveloffthisyear,butnetincomewilllikely remain below its five-year average due to expectedsoftness in farm cash receipts. While crop rotation awayfromcanolacanhelptomitigatethedownsideimpactsonfarmrevenue,therearelimitstothedegreetowhichrotationcanbeutilized.
An additional bright spot has been the province’s labourmarkets.Jobgrowthisat2%(ytd),andtheunemploymentratehasaveraged5.4%sofarthisyear–asubstantial im-provementrelativetothelastthreeyears(Chart2).Inturn,thisimprovedemploymentsituation,aswellasimprovedaf-fordability,isexpectedtosupportareboundinhomesalesinthecomingquarters.Thatsaid,homebuildingisstillex-pectedtoremainweakgivencontinuedelevatedsupply.
TheSaskatchewan government plans to eliminate a $380milliondeficitinthecurrentyear,agoalthatcouldbechal-lenginggivensomeoftheunanticipatedsoftnessthisyearincommoditymarkets.Ontheplusside,theProvince’sstill-lownetdebt-to-GDPratiocontinuestoprovidemoreflex-ibilitythanmostofitsprovincialcounterparts.
2018 2019 2020
Real GDP 1.5 0.8 1.2
Nominal GDP 3.2 2.1 3.8
Employment 0.5 1.4 0.7
Unemployment Rate (%) 6.1 5.5 5.8
Housing Starts (000's) 3.6 2.3 4.1
Existing Home Prices -2.3 -2.0 -0.2
Home Sales -7.1 7.9 6.9
[ Annual average % change, unless otherwise noted ]
Saskatchewan Economic Forecasts
Source: Statistics Canada, CMHC, CREA, Forecast by TD Economics
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Saskatchewan Manitoba Alberta Canada
Chart 1: Saskatchewan's Agricultural Sector is Exposed to the Subdued Canola Outlook
Canola Cash Receipts as a Percentage of Total Farm CashReceipts (2018)Canola Seed Exports to China as a Percentage of Total AgricultureExports to All Countries (2018)*
Source: Industry Canada, Statistics Canada, TD Economics*Data is for domestic exports and excludes support activities, forestry, floriculture, and aquaculture products
ManitobaAfterarobustturnoutofaround3%in2017,Manitoba’seconomic growth moderated to about half that rate in2018. Bothgainsingoodsandservicesproductionweresofter,withtheformerweigheddownbyminingindustryclosures.Meanwhile, services output eased to its slowestpacesinceatleast1998,clippedbysofterretailspending.Onthebrightside,constructionoutputcontinuedtoex-pand rapidly, boostedby on-goingworkon theKeeyaskpowerstationandtheLine3Replacementproject.
However,wedon’tanticipatethesamecontributionfromtheseconstructionprojectsmovingforward.WorkontheKeeyask project shouldwind down through 2020,whileactivity on theCanadian portion of theLine 3 pipelineprojectwasnearingcompletionthisspring.Thesearemajorfactorsunderpinningourviewthatgrowthwilleaseagainin 2019.However,Manitoba’s economy is set to recoversomewhat in2020,partlyon thebackof amorebenigninterestrateenvironmentthanexpectedafewmonthsagoandanupturnintheeconomicfortunesofotherprovinces.
After a strong performance in 2018, exports dropped inthefirstquarter,weigheddownbyloweragriculturalship-ments.Lookingahead,weexpectinternationalexportstogrowataslowerpacefortheremainderof2019and2020,alongsideaneasingexpansionstateside.GrowingtensionsbetweenCanadaandChinahasleftManitobainthecross-hairs,withfallingpricesforcanolacropsdepressingfarmreceiptsandnominalGDPgrowth.
OntarioWeaknessinlate2018lookstohavelingeredintothefirstquarter, as Ontario’s economy likely recorded next to nogrowth.Thisweakstarttotheyearleavesgrowthontracktoslowsignificantlyin2019followinglastyear’srespectable2.2%outturn.Thatsaid,thefirstquarterdetailswereproba-blybetterthantheheadline,asconsumerspendingstrength-ened andmachinery and equipment investment increasedsharply.Thisfitswithourviewthatthefirstquarterwasthenadirforgrowth,withsomemodestaccelerationlikelyinthecardsovertherestof2019.
Inordertoaddressitssizeabledeficit,theprovincialgovern-menthasoutlinedaplan to reduce spendinggrowthwellbelowitsrecenttrendincomingyears.Thisloomingfiscalrestraintisexpectedtoexertadragongrowth,particularlyin2020.However,totheextentthatOntario’sdeficitanddebtpositonscanbeputonamoresustainablepath,theprovin-cialeconomywillbenefitoverthelongerhaul.
The recent escalation in trade policy uncertainty betweentheUS andChina represents a growing risk toOntario’seconomythroughpotentialnegativeimpactsonUSgrowthandoverallconfidence.It’snotallbadnewsforbusinesseshowever,asU.S.tariffsonsteelandaluminumproductswererecentlydropped.Meanwhile, thedeal struckbetweentheU.S.andMexicowhichavoidsAmerican tariffsonMexi-canproductsshouldsupportnear-termsentimentasitim-pliesfewerpotentialroadblockstowardsaratificationoftheCUSMAtradeagreement.
Alsoonthebrighterside,Ontario’slabourmarketisonfire,with137.5kjobsaddedthisyear-eclipsing2018’sfull-yeartally.Strong jobgrowthhaskeptconsumerspendingrun-ning at amodest clip in recent quarters, helping ease thestingofpast ratehikes.Peeringahead,while theoutsizedemployment gains are likely to moderate in the comingquarters,conditionsinjobmarketsareexpectedtoremainstrongandsupportivetofurtherspendinggains.
QuébecQuebec has not been immune to the softness that hasgrippedprovincialeconomiessincelatelastyear.GrowthinQuebec (+1.5%)managed to outperform the nationalaverageinthefourthquarterof2018,butthedetailsweredecidedlysofter.What’smore,thepaceofexpansionlikelyslowedfurtherintheopeningquarterof2019,asnettradetookabigbiteoutofgrowth.Thissub-parstart to2019underpinsourviewthateconomicgrowthwilleaseto1.7%this year – still a fairly strong, above-trend showing andnotablyfasterthanwhatisexpectedforthecountryoverall.
Consumerspendingwassofttoendlastyear.Pastincreas-esininterestrateswerepartlytoblame,withrate-sensitivemotorvehiclesalesdraggingdowntheheadline.However,householdfinancesareinrelativelygoodshape,consumerconfidence is elevated, and labour markets are booming.Indeed,fromJanuarytoMay,nearly45k(mostlyfull-time)jobswerecreated intheprovince,carvingtheunemploy-mentratetoanall-timelow.Theseconditions,alongsideamorerecentpull-backinborrowingcosts,fueledaprobablepickupinfirstquarterspendinggrowth.And,thesesamefactors should continue buoying household consumptionmovingforward.
Againstwhatwasahighlyuncertainbackdropatthetime,businessinvestmenttookastepbacktoclose2018.How-ever, this weakness probably turned around in the firstquarter. Looking ahead, non-residential spending shouldcontinuetorise,boostedbyfederalandprovincialacceler-ateddepreciationmeasuresandarelativelyhealthydomes-ticbackdrop.Ontheexternalfront,therecentlyliftedU.S.tariffsonsteelandaluminumproductswilllikelyenhancewhat is already elevated business confidence, particularlyas aluminumproducts are an important export forQue-bec.However,overallexportgrowthshouldeasealongsideaslowingU.S.economy.What’smore,tradeskirmishesbe-tweentheU.S.andChinawilllikelydentsentiment.
Measures contained in provincial government’s 2019/20budgetaregrowthsupportive,combiningmodesttaxrelieffor householdswith ramped up program and infrastruc-turespending.Moreover,policiestoenhancetheintegra-tion of immigrants and temporary foreign workers wereintroducedintandemwithincentivesforolderworkerstostayinthelabourforce.Thesemeasureswillbepositiveforgrowthin2019and2020.
New BrunswickAfteranimpressiverunofabove-trendgrowthin2016and2017,NewBrunswick’seconomycametoavirtualstand-stilllastyear.Transitoryfactorsintheprovince’smanufac-turingsectorweighedheavilyontheprovince’sexpansiontoendlastyear.Thisweakhandoff,adropinhomebuildingso far this year, andamore subduedoutlook for exportshaveputNewBrunswickontracktoadvancebyonly0.5%in2019, tiedfor lastplaceontheprovincial leaderboard.Weexpect realGDPgains to returncloser to trend-likeconditionsin2020,butdemographicchallengeswillcon-tinuetocapanyfurtherupside.
NewBrunswick’smanufacturingsalesandexportstookahitinlate2018onthebackofmaintenanceandanexplo-sionatitslargeoilrefinery(Chart1).Thesectormanagedtostagearecoveryfromthesesetbacksinthefirstquarteroftheyear,butonlypartially.Whilefurtherrecoveryislikelyoverthesecondhalfoftheyear,theimprovementwillbemutedbyweakness in theglobalmarket forkey forestryandwoodproducts industry,whereactivity isbeingheldbackbylowlumberprices,softdemand,andlingeringtar-iffs.Therecently implementedCETAandCPTPPtradeagreementsprovideasignificantmedium-termgrowthop-portunity,particularlywithin theagricultureand forestrybusinesses.Alsoprovidingsomeoffsettotemporaryweak-nesses in the province’s goods sectors is a rising servicessector,withseverallargecorporationschoosingtoestablishservicecentersandofficesintheprovince’scities.
Meanwhile,aone recentbright spot isNewBrunswick’slabourmarket,whichhasbeen showing signsoffirmingfollowinglastyear’slacklusterperformance.Jobgrowthisup0.7%(ytdy/y),supportedbysolidgrowthintheprov-ince’s labour force. New Brunswick continues to benefitfromarisingpopulationbaseonthebackofrecord-highinternationalimmigrationintotheprovince.Still,negativeinterprovincialmigrationandalownaturalratecontinuetoactasheadwindstotheprovince’slonger-termgrowthpotential.
Whilehomebuilding in theprovincehasbeenweak, theresalemarkethasbeenstrongsincethesecondhalfoflastyear.(Chart2)Indeed,existinghomesalesareupanote-worthy15%relativeto2017.Inadditiontorobustimmi-gration,muchofthisisduetomorefavourableborrowingratesandsupportiveaffordabilityconditions.
2018 2019 2020
Real GDP 0.1 0.5 0.9
Nominal GDP 1.0 2.1 2.9
Employment 0.3 0.8 -0.1
Unemployment Rate (%) 8.0 7.9 8.1
Housing Starts (000's) 2.3 1.8 1.9
Existing Home Prices 5.9 3.9 5.6
Home Sales 1.5 6.8 4.7
New Brunswick Economic Forecasts[ Annual average % change, unless otherwise noted ]
Source: Statistics Canada, CMHC, CREA, Forecast by TD Economics
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Chart 2: New Brunswick's Resale Market Has Lately Been Strong
Nova ScotiaOnanindustrybasis,NovaScotia’seconomyexpandedata1.2%ratein2018,inlinewithourexpectations.Thiswasarespectableoutturnfortheprovince,withgrowthclockinginabovethepost-recessionaverage.Theminingsectorsup-portedgrowthlastyear,asproductionatthenewTuoquoygoldminerampedup.Atthesametime,oilandgaspro-ductionmoderatedandretailspendingwassoft.
Theeconomygainedsomesteamintheearlypartof2019.Indeed,nearly10kjobswerecreatedthroughMay,mark-ingthebestsuchperformancesince1994.Thisshowedupinconsumer spending,with inflation-adjusted retail salesbouncingback in thefirstquarter. In fact, salesvolumeschalkeduptheirbestquarterforgrowthsince2015inQ1.
Populationgrowthmatchedamulti-decadehighinthefirstquarterand,morebroadly,hasbeentrendinghighersince2016.Thesegainshavebeenfueledmostlybeinternation-almigration,which likelyhas somestayingpowerowingto rising federal immigration targets. Robust populationgrowthhassparkedgainsinhomesalesandhomebuilding,withtheformerrisingsofarthisyearandthelatterremain-ingelevated.NovaScotia’stighthousingmarketispoisedtobenefitfromthefederalgovernment’sFirst-timeHomeBuyersIncentive,particularlyasprevailinghomepriceandincomelevelsfallwellwithinprogramthresholds.
Yet,despiteallthesepositives,weremainhesitanttomarkupourgrowthforecastforthisyearsignificantly.Thisisbe-causeheightenedtradeuncertaintyshoulddampentheex-pansionsintheU.S.andChina,thusweighingonexports.Moderatinggrowth inChina isparticularly impactful,asthe share ofNovaScotia’s exports shipped toChinahasrisensharplysince2014.However, shouldthe large-scaleGoldboroLNGproject get a green light (a final invest-mentdecisionisduesometimethisyear),ourforecastswillreceiveasignificantupgrade.
2018 2019 2020
Real GDP 1.2 1.1 1.2
Nominal GDP 2.6 3.0 3.1
Employment 1.5 2.2 -0.1
Unemployment Rate (%) 7.6 6.9 7.4
Housing Starts (000's) 4.9 4.0 4.0
Existing Home Prices 3.2 6.7 3.9
Home Sales 5.3 6.1 5.5
Nova Scotia Economic Forecasts[ Annual average % change, unless otherwise noted ]
Source: Statistics Canada, CMHC, CREA, Forecast by TD Economics
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Source: Statistics Canada, TD Economics
Employment, Year/Year % Change, 3-mma
Chart 1: Employment Expanding Rapidly in Nova Scotia
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Source: Statistics Canada, TD Economics
Share of Merchandise Exports Shipped to China, %
Chart 2: Nova Scotia Levered to Slowing Chinese Economy
Prince Edward IslandPEI’s economy has benefitted tremendously from multi-decadehighsinpopulationgrowth.Internationalmigrationhasfueledthisstrength,withrampedupfederalimmigra-tion targetshelpingnewcomersflock toPEI.Historically,the provincehashad some trouble retaining these immi-grants.However, there is some evidence that thismaybeturning around, with the rate of newcomers leaving forotherprovincesslowingsince2016.
Robustpopulationgrowth–andtheattendantboosttodo-mesticactivity–coupledwithsturdyeconomicconditionsstateside propelled a sizzling 2.6% outturn for industry-based GDP in 2018 (we expect that expenditure-basedGDP nearly matched this pace last year). This strengthfounditswaytolabourmarkets,withemploymentup3.0%and theunemployment rate falling toa record low.Thesefirmtrendshavebeensustainedsofarin2019,withpayrollemploymentupsolidlyinthefirstquarter.Meanwhile,othersectorsarealsoperformingwell,withmanufacturingship-mentshigheryear-over-year,inflation-adjustedretailspend-ingadvancingatastrongclip,governmentprogramssup-portingariseinhomebuilding,andwholesaletradesurging.What’smore,tourismactivityremainedhealthyinthefirstquarter,withovernightstaysadvancingatadouble-digitan-nualpace.Thispositivemomentumhas ledustoupgradeourPEIforecastfor2019.
However,we still expect a slowerpaceofgrowth inboth2019and2020relativetotheoutsizedperformancesofre-centyears.Firstly,withlabourmarketsbecomingtighter,itwillbehardforjobgrowthtomatch2018’storridperfor-mance.Softeremploymentgrowthshouldkeepalidoncon-sumerspending.Meanwhile,pastratehikescombinedwithstronghomepricegrowthinrecentyearshaschippedawayataffordability,whichisexpectedtoputadamperonnear-termhomesalesactivity.Ontheexportside,boththeUSandglobaleconomieshavebeenslowing,whichhasnega-tiveimplicationsformanufacturingandtourism.Finally,theprovince’slatestCapitalBudgetpointstosomemoderationininfrastructurespendingbeyondthisfiscalyear.
The newly elected PC government’s platform contains amodest mix of tax cuts and spending initiatives. Bigger-ticket promises includepledges to cut small business andpersonalincometaxes.TheProvinceissportingits3rdlarg-estsurplusinnearly40years,settingthetablenicelyforthenewgovernmenttoallocatefundingtoitskeypriorities.
Newfoundland & LabradorAramp-upinoilproduction,aresumptioninironorepro-duction,andthestartofconstructiononanumberofsmall-er-scale capitalprojects should support amodestbounce-backinNewfoundland&Labrador’seconomythisyear.In2020,growthisexpectedtoslipbacktoamoremodestrateastheimpactofthisyear’sconstructionstrengthfadesanddemographicscontinuetoweighonlabourforcegrowth.
Anoutlook for increasedcommodityproduction thisyearis instrumental in driving near-termgains in exports andmanufacturing activity. For instance, oil production is up3.5%year-to-datey/y,andisexpectedtorisefurtherwitharampupattheHiberniaandHebronoilfields.Theresump-tionofironoreproductionafteratwomonthstrikeattheIronOreCompanyofCanadain2018shouldalsolendahelpinghandtoexportvolumesamidatightglobalmarket.
Afterasubdued2018,thenon-residentialconstructionsec-torisexpectedtobeamajorcontributortogrowth.Capi-talspendingisprojectedtoreceiveaboostfromtheWestWhiteRosefieldexpansionandVoisey’sBayundergroundmine expansion.Other support could come frompre-de-velopmentspendingontheBayDuNordproject,ifsanc-tioned,inadditiontoincreasedoffshoreexplorationactivity.
In contrast, consumer spending is likely to remain tepid.Retail sales are up amodest 2% (ytd y/y) so far in 2019,implyingflatvolumesgrowth.Thiscautionisdespitesignsofanimprovinglabourmarket,wherejobandwagegrowthhaverecentlysurprisedontheupside(Chart1).Incontrast,housingdemandmaybestartingtorespondtothestron-gerjobconditionsaswellasarecentpull-backinborrowingrates.Resaleactivityintheprovincewasupmorethan7%inQ1relativetothelastquarterof2018(Chart2).Theim-pactofthenewfederalhousingmeasures,notablytheFirstTimeHomeBuyer’sinitiative,isalsolikelytocontributetoamodestuptick insales thisyear.While thesesignalsarepositive, ongoing demographic pressures will continue tolimittheupsidepotentialintheprovince’shousingmarketsoverthemediumterm.
British Columbia 2.4 1.5 2.0 4.7 3.5 4.4 1.1 3.1 0.8 4.7 4.6 4.7 40.9 42.1 34.9 0.9 -7.9 -0.6
Source: CREA, CMHC, Statistics Canada, TD Economics. Forecasts by TD Economics as at June 2019.
Provincial Economic Forecasts
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Home Prices
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