BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

December 07, 2011 09:43 ET

BMO Economics: Newfoundland & Labrador to Lead Canada in Growth in 2011

- Construction is Biggest Economic Driver Since Recession

- Real GDP Growth of 3.5 Per Cent in 2011; 1.6 Per Cent in 2012 (Canada's at 2.3 Per Cent in 2011; 2.0 Per Cent in 2012)

ST. JOHN'S, NEWFOUNDLAND and LABRADOR--(Marketwire - Dec. 7, 2011) - Newfoundland & Labrador is on pace to lead the country with 3.5 per cent real GDP growth in 2011, according to the Provincial Monitor report released today by BMO Economics.

"This robust growth has been helped by investment activity in both the public and private sectors," said Robert Kavcic, Economist, BMO Capital Markets. "However, growth will cool in 2012 as investment levels off and oil production dips."

Construction activity has been the biggest economic driver in the province since the recession. "Government infrastructure spending is on pace to total more than $1 billion in fiscal 2011-2012," noted Mr. Kavcic. "The private sector is also providing a boost, with projects like the Vale nickel processing plant and the Hibernia South and Hebron offshore oil projects adding to the level of public-sector investment this year. However, this activity will begin to level off in 2012, and oil production should continue to drift down; output at Terra Nova has peaked, and overall production was down 4.6 per cent year-over-year through the third quarter of 2011."

Employment was up just 0.3 per cent year-over-year in the three months through November, down from a 5.4 per cent year-over-year pace in the first quarter. Construction employment remains robust thanks to investment activity, but employment in trade and transportation & warehousing has begun to decline. The jobless rate has edged back up to 13.2 per cent from a record (back to 1976) low of 11.1 per cent in April.

"Even with some moderating, economic trends in Newfoundland & Labrador continue to support our commercial customers," said Jim Fallon, District Vice-President, Newfoundland & Labrador, BMO Bank of Montreal. "We look forward to continued strength for the province's businesses in the year ahead."

The province's midyear fiscal update increased the fiscal 2011-2012 surplus estimate to $756 million (2.0 per cent of GDP), well above the Budget's $59 million surplus. Newfoundland & Labrador is one of only two provinces with a budget surplus this year (along with Saskatchewan). The Budget forecast a return to deficits in fiscal 2012-2013 and fiscal 2013-2014 ($496 million and $310 million, respectively), before returning to a surplus position in fiscal 2014-2015.

The full Provincial Monitor can be downloaded at

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