Non-residential construction and services will help offset further restructuring by Ontario manufacturers, say Scotiabank economists

    TORONTO, March 15 /CNW/ - Major large-scale public and private
construction projects, alongside healthy services-based activity, will lead
the Ontario economy this year, according to Scotia Economics' latest
Provincial Trends report.
    "Strong global demand is expected to benefit exporters of metals and
minerals, industrial machinery, and aerospace," says David Hamilton,
Economist, Scotiabank. "Non-residential construction remains buoyant as low
financing rates and limited spare capacity spur investment in commercial and
industrial markets. Public sector investment, including transportation and
transit improvements, will also play a major role.
    "Nevertheless, many Ontario exporters are being challenged by a slowing
U.S. economy and a strong Canadian dollar," adds Mr. Hamilton. "Declining auto
sales are negatively impacting the industry, spurring production cuts and
lower parts shipments, while Ontario's forestry sector faces a softer North
American housing market and higher power costs."
    For the third year in a row, Canada is expected to post slower output
growth. Despite the continuing solid gains in the country's resource-rich
regions, manufacturing activity remains under pressure from non-stop foreign
competition, rising input costs and a strong Canadian dollar. Meanwhile,
deteriorating affordability, largely due to higher prices, is expected to put
a chill into the housing market.
    Helping to pick up the slack, capital spending will provide solid
support. Not restricted to energy- and mining-rich provinces, such as
Alberta's oil sands, Saskatchewan's uranium mines or Newfoundland & Labrador's
nickel mines and offshore oilfields, non-residential construction will remain
a key source of growth in such areas as public infrastructure, sea and airport
expansions and commercial building developments, just to name a few. The
spillover effect of construction activity should also benefit other sectors.
Services should remain robust, providing solid underlying support to output
growth, as well as employment opportunities.
    From a regional perspective, growth in the Western and Atlantic regions
should outpace the national average in 2007, while Central Canada lags behind.
Newfoundland & Labrador is expected to best the other provinces as its mining
sector recovers. A slowdown in non-residential construction will moderate
growth in Alberta and B.C., although the two provinces should remain at the
top of the pack. Ontario and Quebec will likely continue to face weakness in
manufacturing amid industry restructuring.

    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: Adrienne Warren, Scotia Economics, (416)
866-4315; David Hamilton, Scotia Economics, (416) 866-4212; Paula Cufre,
Scotiabank Public Affairs, 416-933-1093,

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