BMO Financial Group

BMO Financial Group

October 09, 2012 11:30 ET

BMO Economics: Steady Growth in Canadian Economy Led By Western Provinces

- Projected national growth of 2.2 per cent in 2012, 2.0 per cent in 2013

- Alberta to lead the country with 3.5 per cent growth this year

- Resource sector fueling growth in Western Canada

TORONTO, ONTARIO--(Marketwire - Oct. 9, 2012) - According to the latest edition of the Provincial Monitor report from BMO Economics, the Canadian economy continues to grow at a steady pace, led by above-average growth in Western Canada.

"The resource sector continues to fuel growth in Western Canada, and Alberta is expected to lead the country with 3.5 per cent real GDP growth this year," said Robert Kavcic, Economist, BMO Capital Markets. "While momentum has ebbed somewhat alongside volatile oil prices, rising bitumen production continues to support the labour market and attract migrants to the province. The resource boom is also alive in Saskatchewan, though some uncertainty has been cast on the outlook given more conservative spending plans among major potash producers. Saskatchewan and Manitoba are also enjoying a robust agricultural environment as solid production is met with higher prices after the drought scorched much of the U.S. Midwest."

The report states that, in British Columbia, the housing market has finally shown evidence of a real slowdown, while Central Canada continues to be affected by fiscal restraint, an above-parity loonie and sluggish U.S. demand. "While growth in Ontario is still on track to hit 2 per cent this year, trends in Quebec suggest a much more subdued 1.3 per cent pace," noted Mr. Kavcic.

Atlantic Canada's provinces are all expected to see growth below 2 per cent this year, although Nova Scotia and Newfoundland & Labrador should bounce back in 2013. "Preparatory work for Nova Scotia's $25 billion Federal shipbuilding contract is underway, with growth getting a significant boost later in 2013."

"Several regions of Canada continue to perform well, but businesses across the country need to remain adaptable to change," said Steve Murphy, Senior Vice President, Commercial Banking, BMO Bank of Montreal. "As the economy recovers, businesses need to make sure they are as productive as possible. With capital and financing costs at historic lows in many cases, now is an excellent time to invest."

The Provincial Monitor also included a spotlight on the Canadian housing market, which has cooled in recent months. "The stricter mortgage rules that took effect July 9 appear to have thrown some ice on an already-cooling market," stated Mr. Kavcic. "But, real estate is local, and trends vary considerably across the country."

Mr. Kavcic noted the following notable markets:

  • Vancouver: Correction underway… There's no longer any doubt that a correction is underway in Vancouver. Sales have plunged 26 per cent year-over-year in the latest 3 months, while average prices have shed more than 10 per cent in the past year. At 10 times estimated family income, Vancouver valuations are still Canada's loftiest.
  • Calgary: Re-awakening… Activity is improving thanks to rising demand and a gradual drawdown of the excess supply put up during the 2005-07 boom. Prices have regained about half of the declines seen during the recession, and conditions are on the cusp of a sellers' market. Note that Calgary remains relatively affordable compared to Vancouver and Toronto, with prices little more than 4 times median income.
  • Toronto: Mixed picture… Activity has softened significantly, and while we're not quite seeing a full-scale buyers' market, weak September sales results suggest Toronto is quickly moving in that direction
  • Windsor: The dark horse… A recovering auto sector, 4-year labour deals struck between the Big Three and CAW, and a return to positive population growth are all supportive of Windsor's now fairly tight market (by historical standards).

Real GDP Growth Rate (per cent):

2011 2012 2013
Canada 2.6 2.2 2.0
BC 2.9 2.5 2.4
Alberta 5.2 3.5 2.9
Saskatchewan 4.8 3.1 2.7
Manitoba 1.1 2.6 2.3
Ontario 2.1 2.0 1.8
Quebec 1.7 1.3 1.4
New Brunswick 0.1 1.5 1.8
Nova Scotia 0.3 1.8 2.3
PEI 1.1 1.4 1.4
Newfoundland & Labrador 2.8 1.0 3.3

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 North American financial services organization. With total assets of $542 billion as at July 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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