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BMO Financial Group

October 16, 2014 09:18 ET

BMO Economics: New Brunswick to Begin Narrowing the Gap

- Real GDP growth of 1.3 per cent expected in 2014, 1.7 per cent in 2015 (Canadian real GDP growth of 2.3 per cent expected in 2014, 2.4 per cent in 2015)

- Private sector capital spending expected to expand modestly in 2014

- Higher Exports, Capital Spending to Support Growth in New Brunswick

- Forestry exports get boost from U.S. housing recovery

FREDERICTON, NEW BRUNSWICK--(Marketwired - Oct. 16, 2014) - New Brunswick real GDP is expected to grow 1.3 per cent this year, rising to a 1.7 per cent pace in 2015, according to the Provincial Monitor report released today by BMO Economics.

"New Brunswick's real GDP growth is a full percentage point below the national average, but this gap should narrow slightly in 2015 as exports get a boost and capital spending picks up," said Robert Kavcic, Senior Economist, BMO Capital Markets.

Mr. Kavcic noted that while a retrenchment in capital spending in both the public and private sectors was a key reason for soft growth performance in recent years, StatCan's survey of public and private investment intentions points to a modest 2.1 per cent increase in 2014 - a marked improvement from the double-digit declines seen in each of the prior two years. "Notably, private-sector capital spending is expected to expand 3.9 per cent on the back of machinery & equipment, which would mark the first year of growth since 2008."

Challenges remain in the manufacturing and resource sectors. Potash output poses a downside risk this year with producers scaling back amid a lower pricing environment. "Forestry exports, however, should get a boost from the U.S. housing recovery, with housing starts south of the border now consistently topping the 1 million annualized mark," noted Mr. Kavcic. "In fact, exports in the three months through August sat near the highest level in 7 years. The broader export sector should benefit from the combination of a stronger U.S. economy and weaker Canadian dollar."

Carolyn Booth, Senior Vice President, Atlantic Provinces Division, BMO Bank of Montreal noted that business owners across the province are saying that the stronger U.S. economy and a weaker Canadian dollar should help support both the manufacturing sector and broader export industry. "Our commercial clients operating in the forestry industry have also indicated that this sector will continue to play a critical role in the economic health of New Brunswick, thanks primarily to the U.S. housing recovery."

Overall labour market trends have improved so far this year, with employment up 0.5 per cent year over year through September - near the strongest since 2008. The unemployment rate averaged 9.4 per cent in Q3, or a 3-year low.

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 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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