BMO Financial Group
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BMO Financial Group

October 30, 2013 11:37 ET

BMO Economics: Historically Favourable Conditions Supporting Newfoundland & Labrador Economy

- GDP growth of 5.0 per cent expected in 2013, 1.4 per cent in 2014 (Canadian GDP growth expected to be 1.6 per cent in 2013, 2.2 per cent in 2014)

- Longer-term prospects for offshore oil are bright

- Private sector job growth is healthy and unemployment at record low

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwired - Oct. 30, 2013) - Economic growth is poised to rebound this year in Newfoundland & Labrador, as oil production bounces back from a year plagued by maintenance shutdowns, according to the Provincial Monitor report released today by BMO Economics.

"Real GDP growth is expected to clock in at a robust 5.5 per cent pace - compared to a fall of 4.8 per cent in 2012 - before slowing to 1.4 per cent in 2014," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Volatile real GDP figures mask an underlying picture of historically favourable economic conditions, and longer-term prospects in the offshore sector are bright."

A maintenance shutdown at Terra Nova through mid-2012 cut oil production by 26 per cent, but year-over-year growth will bounce back this year. "Investment in the oil and gas sector continues to grow at a robust pace, with construction of the Hebron project ramping up, an approved extension of White Rose and a major discovery by Statoil in the Flemish Pass Basin that could hold 300-to-600 million barrels of light oil - potentially the third largest in the province's history," stated Mr. Kavcic.

Other underlying economic trends in the province are solid. "While employment has slipped about 2 per cent so far this year, that reflects deep cuts in the public sector," noted Mr. Kavcic. "Private sector job growth was running at a hearty 5.4 per cent year-over-year clip in September. The jobless rate sits at a record low 10.4 per cent, and wages are growing at an above-average pace."

Mr. Kavcic also noted that, while the rest of Atlantic Canada is seeing a outward flow of migrants, Newfoundland & Labrador has held relatively steady. That, along with a tighter labour market and firmer wage growth, are supporting better-than-average trends in housing and consumer spending. Retail sales were up more than 5 per cent, year-over-year, through August, trailing only Alberta.

"Our clients are optimistic about the economy and are looking at ways to expand their businesses," said Allison Hakomaki, Vice-President of Commercial Banking for Atlantic Canada at BMO Bank of Montreal. "Whether their business relates to the oil and gas sector, the large energy projects such as Hebron or Muskrat Falls, or the fisheries, our clients are making investments in their businesses because they have confidence in the future of the province and want to take advantage of the growth in Newfoundland and Labrador's economy," added Ms. Hakomaki.

The full Provincial Monitor can be downloaded at www.bmocm.com/economics.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $549 billion as at July 31, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.

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