BMO Financial Group

BMO Financial Group

October 16, 2014 09:25 ET

BMO Economics: Long-Term Prospects Encouraging for Newfoundland & Labrador Oil Sector

- Real GDP growth of 1.0 per cent expected in 2014, 0.8 per cent in 2015 (Canadian real GDP growth of 2.3 per cent expected in 2014, 2.5 per cent in 2015)

- Healthy longer-term prospects for offshore oil, hydro

- Consumer spending, housing market trends outperforming Atlantic Canadian peers

ST. JOHN'S, NEWFOUNDLAND--(Marketwired - Oct. 16, 2014) - Economic growth continues to bounce around in Newfoundland & Labrador, according to the Provincial Monitor Report released today by BMO Economics. Real GDP in the province is expected to clock in at 1.0 per cent this year - the slowest clip in Canada - but that follows a massive 7.9 per cent bounce in 2013 related to prior-year maintenance shutdowns in the oil sector. Growth is expected to be 0.8 per cent in 2015.

"Oil production continues to drift down after peaking in 2007 - at least until the pipeline is filled with new output," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Indeed, investment in the oil & gas sector continues at a healthy pace, with construction of the Hebron project underway. Production, however, is not expected until late 2017. Also, an extension of White Rose is in the engineering and design phase, and a major discovery by Statoil in the Flemish Pass Basin could hold 300 million to 600 million barrels of light oil. In the meantime, oil production slipped 4.5 per cent year over year through July. Elsewhere, development of the Muskrat Falls hydro project, while faced with some cost and timing uncertainty recently, should be producing power by late 2017."

Other underlying economic trends in the province have been mixed.

"Employment has begun to turn around in recent months after sliding through 2013 and early 2014," noted Mr. Kavcic. "The public sector continues to shed jobs, now down nearly 10 per cent in the past year. The jobless rate is higher, averaging 12.9 per cent in the third quarter of 2014 - by far the highest in Canada. Despite the recent gyrations in the labour market, consumer spending and housing market trends continue to outperform the province's Atlantic Canada peers. Retail sales were up nearly 6 per cent year over year in July, while home prices are holding near record levels, though momentum has clearly slowed this year."

"Although the province is experiencing a short-term lull, prospects for business - especially in the oil sector - remain optimistic heading into 2015," said Carolyn Booth, Senior Vice President, Atlantic Provinces Division, BMO Bank of Montreal. "The energy sector continues to be an area of attractive growth for business owners and other commercial clients. These projects are expected to produce economic spinoffs for the province in the coming years."

The full Provincial Monitor can be downloaded at

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had more than $586 billion in total assets and approximately 47,000 employees at July 31, 2014.

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