BMO Financial Group
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BMO Financial Group

October 16, 2014 09:20 ET

BMO Economics: Stronger U.S. Economy to Support Growth in Quebec

- Real GDP growth of 1.8 per cent expected in 2014, 2.0 per cent in 2015 (Canadian real GDP growth of 2.3 per cent expected in 2014, 2.4 per cent in 2015)

- Stable political landscape should support business confidence and investment

- Exports to benefit from lower dollar and stronger sales to the U.S.

MONTREAL, QUEBEC--(Marketwired - Oct. 16, 2014) - Quebec's economy is poised to pick up on the back of a stronger U.S. economy, according to the Provincial Monitor report released today by BMO Economics. Real GDP is expected to grow 1.8 per cent this year and pick up at a 2.0 per cent pace in 2015.

"Net exports are expected to benefit from stronger sales to the U.S. and the impact of past weakness in the Canadian dollar," said Robert Kavcic, Senior Economist, BMO Capital Markets. "The political landscape has also stabilized, which should support business confidence and investment. Exports and business investment have been a drag on growth, but momentum appears to be turning positive."

The combination of stronger U.S. demand and a weaker Canadian dollar now appears to be having a positive impact in Quebec, according to Mr. Kavcic. "Business investment saw its first positive quarter in almost two years in the second quarter of 2014. While growth will hardly be robust in these areas, it looks like a significant drag on the Quebec economy is at least fading."

The housing market remains subdued, including that in Montreal - unlike Canada's other major cities. Home sales in Montreal over the latest 12 months were the lowest in more than a decade, and there is more than a year's worth of resale supply on the market across the province. "Buyers remain in control, with average prices little changed over the past two years," noted Mr. Kavcic. "With the soft demand backdrop and little in the way of demographic pressure, housing starts have settled in to levels near 12-year lows.

Employment was up 0.1 per cent year over year through September and the jobless rate lies at 7.8 per cent, a full percentage point above the national average. Private-sector employment has slipped nearly 3 per cent since its late-2012 high.

"Business optimism in Quebec remains positive, supported by the political landscape having stabilized somewhat and the stronger U.S. economy," said Mario Rigante, Senior Vice President, Quebec Division, BMO Bank of Montreal. "In fact, a recent BMO survey - conducted in light of Small Business Month - supports this notion, as it revealed that Quebec business owners are noticeably more optimistic about the state of the economy than they were six months ago."

Mr. Rigante added, "Although our customers have mentioned that exports and business investments have been slow to pick-up, we expect that the weakened Canadian dollar will help create a pick-up heading into 2015."

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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