Quebec to get through the recession with fewer bumps and bruises, says RBC Economics



    Head start in infrastructure spending helps smooth impact

    TORONTO, June 15 /CNW/ - Although Quebec's economy is facing its toughest
economic conditions of the past 18 years, it is expected to get through the
recession with fewer bumps and bruises than Canada's other large provinces,
according to a new RBC Economics report.
    "The performance of Quebec's economy has eroded noticeably over the first
few months of 2009," said Craig Wright, senior vice-president and chief
economist, RBC. "However, it is less vulnerable to the breakdown of a major
economic catalyst, such as Ontario's auto sector. Also, infrastructure
spending in Quebec has had a head start, which is helping to smooth the
recession's impact."
    The report notes that builders have put the brakes on new home building
in the province, slowing the pace of housing starts to the second lowest point
since 2001. In addition, manufacturing heavyweights, such as the aluminum and
aerospace industries, have suffered setbacks due to deteriorating market
conditions, which also continue to plague producers of pulp, paper and wood
products and furniture.
    With negative forces intensifying and likely to persist longer than
previously anticipated, RBC Economics has lowered its real GDP growth forecast
for Quebec to -1.6 per cent from the -0.5 per cent cited in its March
Provincial Outlook. This would represent the province's first annual
contraction in activity since 1991, when the economy shrank by a more
significant 2.7 per cent. The report is also projecting that the unemployment
rate will average 8.8 per cent in 2009.
    Fiscal stimulus spending is cited by the report as one of the reasons for
a more optimistic provincial economic outlook for 2010. The Quebec government
recently boosted its infrastructure renewal plan to $42 million and extended
it into 2013. In the current fiscal year, spending on various public
infrastructures in Quebec is set to climb by more than 8 per cent, while
Hydro-Quebec is planning an 11 per cent boost to its capital investment
expenditures.
    With this infrastructure investment, the credit crisis subsiding and
Quebec's main trading partners regaining their footing later this year, the
report expects that consumer and business sentiment should gradually turn
around, spurring a moderate recovery during 2010, with real GDP growing by 2.3
per cent.
    The main theme of the RBC Provincial Outlook is that tremendous weakness
late last year and early this year has prompted a downward revision to real
GDP growth forecasts across the board for 2009. Recent developments lend
support to RBC's view that a general recovery will be established by the
second half of 2009 and sustained in 2010. In 2009, expectations are that the
economies of only three provinces - Saskatchewan, Manitoba and Nova Scotia -
will grow, while all other provincial economies will contract. Ontario (deep
troubles in the auto sector) and Newfoundland and Labrador (sharp drop in
mineral and oil production) are taking the biggest hits, with Alberta
(cutbacks in business and residential investment) being the other province
showing above-average decline in activity. However, RBC continues to project
that growth will return to all provinces next year.

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

    According to the report (available online as of 8 a.m. EDT today, at    
www.rbc.com/economics/market/pdf/provfcst.pdf), provincial forecast details
are as follows:

    
                      Real GDP         Housing starts         Retail sales

                   Y/Y % Change          Thousands            Y/Y % Change
                08     09     10      08     09     10      08     09     10
                --     --     --      --     --     --      --     --     --

    N.& L.    -0.1   -3.5    3.0     3.2    3.2    3.0     7.6    0.1    4.8

    P.E.I      0.9   -1.8    2.0     0.7    0.5    0.7     5.6   -1.3    4.1

    N.S.       2.0    0.2    2.5     4.3    3.2    3.5     4.2   -2.8    4.5

    N.B.       0.0   -0.5    2.7     4.2    3.5    3.5     5.9   -2.2    4.1

    QUE.       1.0   -1.6    2.3    47.9   38.9   37.0     5.1   -1.5    4.5

    ONT.      -0.4   -3.4    2.2    75.6   52.7   65.0     3.5   -3.0    4.2

    MAN.       2.4    0.5    2.8     5.6    3.9    5.3     7.2   -2.6    5.4

    SASK.      4.4    0.7    2.8     6.8    3.3    3.7    10.6   -1.9    5.8

    ALTA.     -0.2   -2.5    2.9    29.0   16.7   28.0    -0.1   -7.8    5.7

    B.C.      -0.3   -1.9    2.9    34.3   14.7   23.0     0.3   -6.5    5.9

    CANADA     0.4   -2.4    2.5     211    141    173     3.4   -3.7    4.8


                    Employment        Unemployment rate

                   Y/Y % Change               %
                08     09     10      08     09     10
                --     --     --      --     --     --

    N.& L.     1.5   -2.6    1.1    13.2   14.7   14.8

    P.E.I      1.3   -2.3    1.0    10.7   12.5   12.6

    N.S.       1.2   -0.4    1.0     7.7    9.3    9.6

    N.B.       0.9   -0.5    0.6     8.6    9.5   10.3

    QUE.       0.8   -1.0    1.1     7.2    8.8    9.4

    ONT.       1.4   -2.6    1.0     6.5    9.3    9.9

    MAN.       1.7   -0.1    1.3     4.1    5.1    5.6

    SASK.      2.2    1.5    1.2     4.1    5.2    5.7

    ALTA.      2.7   -1.0    1.4     3.6    6.4    6.7

    B.C.       2.1   -2.5    2.1     4.6    7.8    7.8

    CANADA     1.5   -1.7    1.3     6.1    8.5    9.0
    





For further information:

For further information: Craig Wright, RBC Economics, (416) 974-7457;
Robert Hogue, RBC Economics, (416) 974-6192; Stephanie Lu, RBC Media
Relations, (416) 974-5506


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