BMO Economics: Shipbuilding Contract the Key to Strong Nova Scotia Economic Growth

HALIFAX, NOVA SCOTIA--(Marketwire - Jan. 17, 2013) - Economic growth in Nova Scotia is poised to pick up over the medium term, with the Federal shipbuilding contract boosting activity for years to come, according to the Provincial Monitor report released today by BMO Economics. Growth is expected to be 1.8 per cent in 2013.

"The contract landed by Irving Shipbuilding to build combat ships for the Royal Canadian Navy is worth an estimated $25 billion through 2030, and some activity is assumed to get underway in 2013," said Robert Kavcic, Senior Economist, BMO Capital Markets. "While clearly positive for the Nova Scotia economy, the massive project is not without challenges. Among these is the availability of skilled labour, some of which has already migrated to more lucrative labour markets in Western Canada."

Other major projects in the province have faced some issues recently; Encana's Deep Panuke natural gas project is now not expected to begin producing until later in 2013, while output at Sable was tripped up by unexpected downtime in 2012. That said, output in late-2013 and into 2014 should be supportive of growth. Meantime, a deal between the Province and Pacific West Commercial Corp. will keep production rolling at the Port Hawkesbury paper mill, and auto-related exporters will benefit from strong U.S. auto sales, which hit the highest level in almost 5 years in late 2012.

"Our commercial clients throughout Nova Scotia are confident and making important investments in new equipment, in expanding their operations and in hiring people," said Carolyn Booth, Senior Vice President, Atlantic Provinces, BMO Bank of Montreal. "With the strong loonie, availability of credit, and favourable interest rate environment, now is an excellent time to make investments that will strengthen their productivity over the long term."

The labour market has been steady in recent months. "Employment growth was decent 0.7 per cent in 2012; strong private-sector job growth of 2.7 per cent has outweighed lower public-sector payrolls," stated Mr. Kavcic. "The jobless rate sat at 9.3 per cent in December, but should drift down in the year ahead."

The Province of Nova Scotia revised its deficit forecast to $277 million in fiscal 2012-2013, or 0.7 per cent of GDP, from $211 million projected in the budget. Total revenues were reduced by $90 million (1.0 per cent) to $9.2 billion, mainly reflecting lower personal income tax receipts, with personal income expected to run about $500 million below the budget forecast. At this point, there's no indication that the Province will not balance the budget next fiscal year as planned.

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 North American financial services organization. With total assets of $525 billion as at October 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.