Laura Cooper, RBC economist, discusses Atlantic Canada's economic growth
TORONTO, March 19, 2014 /CNW/ - Atlantic Canada is set to post modest
improvements in growth in 2014, with the exception of Newfoundland &
Labrador, according to the latest RBC Economics Provincial Outlook released today. RBC forecasts all of the provinces in the region to
grow at rates below the national level.
Following a year of subdued growth, Nova Scotia's economy is poised for modest acceleration in 2014. RBC forecasts that
a full year of production at the Deep Panuke offshore natural gas field
and the attendant boost to the province's energy exports will help lift
real GDP growth to 2.0 per cent in 2014.
"A full year of production at Deep Panuke this year is expected to boost
growth in Nova Scotia and support continued trade gains after
experiencing renewed strength in the province's international trade
merchandise exports in 2013," said Craig Wright, senior vice-president
and chief economist, RBC.
Healthy demand for seafood exports will continue in 2014, RBC says,
though year-over-year gains from paper product shipments are set to
ease following a full year of production in 2013 at the re-opened Port
Hawkesbury Mill. Strengthening auto sales in the U.S. are expected to
support the province's largest export, rubber tires, but could be
tempered by an anticipated reduction in production by the province's
largest manufacturer over the next 18 months.
The Provincial Outlook notes that as the province moves towards an
anticipated 2015 start date for the "cutting of steel", tasks related
to the multi-year $25 billion shipbuilding procurement contract
continue to advance. Increased capital spending plans were confirmed in
the recent Statistics Canada P&PI survey, which indicated capital
investment (excluding housing) would rise a modest 1.9 per cent in
RBC expects a modest recovery in employment in Nova Scotia, projected to
rise 0.4 per cent in 2014 though this would mark the seventh year of
sub-1.0 per cent growth in the province. The slight recovery in the
labour market at the margin, however, will help to restore some
confidence among consumers and provide a small lift to overall consumer
spending, RBC says.
Following a strong rebound in crude oil production that fuelled Newfoundland & Labrador's economic growth to a robust pace of 6.0 per cent in 2013, the
province's economy is expected to ease to a growth rate of 1.5 per cent
RBC notes that the National Energy Board forecasts crude oil production
will decline by 0.8 per cent in 2014, following a 16 per cent rebound
in 2013, due to the maturation of existing offshore oilfields.
"The absence of the surge in crude oil production that launched
Newfoundland & Labrador to the top of provincial growth rankings in
2013 is expected to significantly ease the province's growth rate in
2014," added Wright. "That said, we expect the energy sector to
continue to be a strong driver of economic growth with capital
investment remaining historically elevated supported by advances of
Statistics Canada's latest investment intentions survey indicates that
spending by the oil and gas sector is expected to rise by 9.7 per cent
to $5.1 billion in 2014. Construction on the Hebron offshore oil
project is expected to peak this year, while ongoing work on the
Hibernia Southern Extension Unit and South White Rose extension are
expected to continue to contribute to investment in the province.
With challenging conditions continuing to weigh on the sector, mining
activity is not expected to pick up in 2014. "Softer commodity prices
and lower production troubled the industry in 2013, and recent capital
spending intentions show further cutbacks are in the cards for the
mining industry in 2014," explained Wright.
However, the outlook for mining is not all negative, RBC says. Despite
persistent downside risks for iron ore prices, the Iron Ore Company of
Canada is on track for the second phase of expansion to increase
production in 2014. Also, the recent government approval of the Kami
project indicates construction is likely to ramp up this year,
offsetting the anticipated pullback in construction related to the
completion of Vale's processing plant in 2013.
RBC notes that though subdued employment growth is expected to persist
this year, a peak in construction jobs at the Hebron offshore project
is expected to contribute to employment gains in the province's goods
producing industries, and advances in developments of other major
projects are expected to provide further support with construction set
to peak at the province's Muskrat Falls hydroelectric project in 2015.
"We expect the disruption in economic activity from severe winter
weather and subsequent power outages at the start of this year to be
reversed in the coming months," added Wright.
RBC expects economic growth in Prince Edward Island to remain subdued in 2014, rising only modestly by 1.4 per cent and
slowing in 2015 to a rate of 1.1 per cent.
"A sizeable pullback in non-residential capital investment is expected
to temper the anticipated rise in PEI's economic activity and add to
intensifying domestic headwinds," added Wright. "Providing a partial
offset, however, will be a weaker Canadian dollar and strengthening
U.S. economy that should provide support to both the province's tourism
and export industries in 2014."
The anticipated decline in capital investment in PEI in 2014 (excluding
housing) will reverse a similar sized jump in 2013, RBC says. The
retracement of last year's increases will be seen in both
non-residential construction spending and machinery and equipment
investment, with the bulk of the decline expected from a significant
pullback in the public sector. As outlined in the provincial
government's fall 2013 capital plan, a 12.1 per cent drop in capital
expenditures is expected in the 2014/15 fiscal year, with spending
declines across most departments.
The Outlook notes that employment growth accelerated to a 1.8 per cent
pace in 2013, as the private sector continued to expand hiring and a
rising number of Island residents entered self-employment. And though
strong employment gains continued earlier this year in the province,
RBC expects the overall pace to moderate as government fiscal restraint
weighs on public sector hiring. Still, the overall employment gains
should be sufficient enough to put further downward pressure on the
unemployment rate, RBC says.
RBC anticipates that PEI's spring budget will provide an indication of
the province's progress on its path to budget balance by 2015/16, after
a larger-than-expected deficit of $79 million in 2012/13. A potential
challenge for the province is expected to come from a declining tax
base as a greater share of the population enters retirement age. A
further moderation in international migration also presents a potential
challenge for the province.
New Brunswick's economy is gradually turning the corner, as lacklustre growth
conditions weighing on activity in recent years are set to ease in
2014, propelled by a boost in capital investment and an anticipated
turnaround in the province's labour markets. RBC forecasts real GDP
growth to accelerate to 1.0 per cent in 2014 and 1.4 per cent in 2015.
In the second half of 2013, non-residential building construction rose
above year-ago levels for the first time in two years. RBC anticipates
investment momentum to continue through 2014 with Statistics Canada's
latest P&PI survey indicating that capital spending on non-residential
outlays is set to rise by 4.1 per cent in 2014 after a sizeable 18.4
per cent drop in 2013.
"Private investment is set to rise in New Brunswick in 2014 for the
first time since 2008, providing an offset to further easing in public
investment," added Wright. "The rebound in overall investment
intentions bodes well for the provincial economy finally turning the
corner this year, particularly as major construction projects advance"
RBC anticipates improving prospects in New Brunswick's mining sector
this year with an expected resumption at the Caribou mine, a drilling
program related to the development of an Atlantic Potash mine and the
advancement of the Sisson Brook tungsten mine.
To attract investment to the province's resource sectors, the New
Brunswick government is launching a process to identify potential
interest in potash exploration and is also set to implement a new
natural gas royalty regime in April 2014. RBC says that by replacing a
flat tax structure, the government is hoping to spur new developments
in the natural gas sector and lay the foundation for overall production
and export gains over the long-term.
The provincial government projects an improvement in employment will
support revenue gains through increased consumer spending and expects a
return to surplus in 2017/18. RBC also forecasts a recovery in the
province's labour market, following four years of consecutive declines.
"Looking closely beneath the headline employment drop in 2013, the
private sector marked its first positive annual job growth in 2013
since 2007," added Wright. "We expect further creation of
private-sector jobs in 2014 to offset continued losses in the public
sector, leading to a net overall employment gain of more than 1,800
jobs in the province this year."
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
For further information:
Craig Wright, RBC Economics Research, 416-974-7457
Laura Cooper, RBC Economics Research, 416-974-8593
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635