Solid investment spending in Quebec to help offset manufacturing weakness, say Scotiabank economists



    TORONTO, Feb. 21 /CNW/ - Public construction activity and the service
sector will be major contributors to Quebec's economic growth of 1.5 per cent
in 2008, helping to offset weakness in the manufacturing and forestry sectors,
according to Scotia Economics' latest Provincial Trends report.
    "Quebec has been investing heavily in hydroelectric capacity as part of
ambitious plans for the energy and power sectors," said David Hamilton,
Economist, Scotiabank. "Further spending is planned for transportation,
transit, education, healthcare and other infrastructure. On the private sector
side, a number of iron ore, zinc and nickel mines are currently under
development and will bolster investment spending further in the province.
    "Although the manufacturing sector will continue to be challenged as the
U.S. economy slows and the Canadian dollar remains strong, the aerospace
industry remains a bright spot amid solid global demand," adds Mr. Hamilton.
"Wood and paper production will also be restrained in 2008 as the province's
sizeable lumber and newsprint sector remains under pressure."
    According to the report, a combination of factors, heightened foreign
competition, a soaring loonie, and more recently, a weakening U.S. economy,
are restraining Canada's overall economic performance, with the manufacturing
sector bearing the brunt of the slowdown. National output growth is expected
to decelerate from an average of 2.6 per cent in 2007 to 1.9 per cent in 2008.
    At the same time, however, non-residential construction and ongoing
strength in service industries are providing enough forward momentum across
the provinces to offset these headwinds. Construction activity, in particular,
is receiving solid support from both private and public sectors, mainly for
spending on infrastructure.
    Federal, provincial and municipal governments have announced significant
multi-year infrastructure investments. Faced not only with the need to upgrade
roads, bridges and water treatment systems, Canada is also challenged by a
growing economy and population base. At the provincial level, British
Columbia, Ontario and Quebec propose ambitious longer-term transit
development. Alberta faces a critical need to upgrade the infrastructure
surrounding the oil sands. Quebec is spending a substantial amount on
super-hospital projects, as well as investing in power generation and
transmission facilities. On the East coast, the Atlantic Gateway initiative
aims to increase port activity alongside an improved transportation network.
    "Although most provinces are expected to witness some softening in growth
in 2008, there will continue to be significant regional disparities between
the Western, Central and Atlantic provinces," says Mr. Hamilton.
    Regionally, the West will continue to lead with average growth of three
per cent, underpinned by the booming energy and mining sectors. Central
Canada, mired by weakness in its export-oriented manufacturing sectors, will
trail the national average with 1.4 per cent growth in 2008. Similar to the
West, average growth of 1.8 per cent in the Atlantic provinces will be
supported by the continuing resource boom.

    Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.





For further information:

For further information: David Hamilton, Scotia Economics, (416)
866-4212, david_hamilton@scotiacapital.com; Patty Stathokostas, Scotiabank
Public Affairs, (416) 866-3625, patty_stathokostas@scotiacapital.com


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