Newfoundland and Labrador remain at the top of Canada's provincial
growth rankings
TORONTO, Sept. 17, 2013 /CNW/ - Atlantic Canada's economic growth is
showing greater strength in comparison to 2012, primarily due to the
exceptional economic performance of Newfoundland and Labrador,
according to the latest RBC Economics Provincial Outlook released today.
A rebound in the oil and gas sector, coupled with improving conditions
for large-scale mining projects through the remainder of the year, is
expected to propel Newfoundland and Labrador to the top of provincial growth rankings in 2013. RBC forecasts robust
6.0 per cent growth for the provincial economy in 2013.
"We expect Newfoundland and Labrador to enjoy renewed economic vigour in
2013, on the heels of a significant pullback in crude oil production
which hampered economic growth in 2012. Despite lacklustre performance
so far this year, crude oil production levels through the end of 2013
are expected to yield a sizeable year-over-year boost in activity,"
said Craig Wright, senior vice-president and chief economist, RBC. "By
next year, oil production will have recovered from depressed levels and
will ease real GDP growth to 1.3 per cent in 2014."
Despite the absence of a lift from oil production next year, RBC says
the ramping up of work on the Hebron offshore oil project, a recently
approved third extension at White Rose and two offshore oil discoveries
this summer will pave the way for sustained contributions from the oil
and gas sector as key economic drivers through the medium-term.
After reaching a record high at the end of last year, employment in the
province has been experiencing a softening trend in recent months. This
decline was accompanied by a larger exit of participants from the
labour force, resulting in the unemployment rate drifting lower.
Comparing closely to national averages, RBC forecasts employment in
Newfoundland and Labrador to grow by 1.5 per cent in 2013 and 1.4 per
cent in 2014.
"The ramping up of major projects, including Muskrat Falls hydroelectric
project and Hebron offshore oil field, is expected to support modest
employment growth and could create favourable conditions for the return
of skilled labour to the province," added Wright.
Uncertain conditions in the commodities markets weighed on mining
activity in Newfoundland and Labrador during the first half of the
year, though any adverse impact on prospects for large scale projects
has been muted. Prices for iron ore have drifted higher more recently
and are expected to sustain historically elevated levels meanwhile
boosting production volumes, RBC says. The completion of the Long
Harbour nickel processing facility and a subsequent ramp up of
production will augment production at the Direct Shipping iron ore
project and Iron Ore Company of Canada's phase two expansion in 2014.
Nova Scotia's economy remains poised for a recovery this year, though growth will be
more modest than previously anticipated because of delays at the new
Deep Panuke offshore natural gas facility and a hesitant pick-up in
domestic activity. RBC has downwardly revised the province's real GDP
growth to 1.2 per cent in 2013 from 1.7 per cent previously, with
growth accelerating to 2.3 per cent in 2014.
"The anticipated rebound in the natural gas sector is being pushed back
as production of the Deep Panuke offshore facility is now expected to
ramp up this fall, instead of the summer - this lowers our expectations
for growth in Nova Scotia this year," said Wright. "Momentum in the
province will accelerate in 2014, however, as production at the
facility and other major projects across the province strengthen and
trickle through the data."
RBC notes that maintenance work at the Sable offshore facility alongside
ongoing maturation related declines drove natural gas production down
by nearly 50 per cent and international exports of the fuel down 88 per
cent in the first seven months of 2013. Nominal exports, on the other
hand, have weathered the storm, with year-to-date growth surpassing
that of other provinces.
With employment in the province down year-to-date in August, earlier
indications of improving prospects for the labour market have faded.
RBC expects fewer than 500 new jobs in the province in 2013, marking
Nova Scotia's fifth consecutive year of employment growth that is less
than 1.0 per cent.
RBC anticipates an increase in offshore exploratory work next year, as
British Petroleum joins Shell in seismic surveying of deepwater sites
as a part of record high exploratory bids in 2011 and 2012. While Nova
Scotia waits for the impact associated with the cutting of steel for
the $25-billion, 30-year shipbuilding procurement contract, ongoing
preparatory work at the Irving shipyard will provide a positive boost
to economic activity, says RBC.
Economic growth in Prince Edward Island hit a speed bump this year, RBC says. While the provincial economy is
expected to shift into high gear in 2014, the anticipated drivers of
economic growth will change, as external trade strengthens and the
domestic economy slows. RBC forecasts real GDP growth easing to 1.2 per
cent in 2013, with external trade supporting modest acceleration to 1.7
per cent in 2014.
"Indicators of economic activity in PEI suggest the domestic economy hit
a soft patch earlier this year, due to easing in labour market activity
and cooling housing starts, and is expected to come under increased
pressure as demographic challenges persist and fiscal restraints
intensify," added Wright. "That said, we expect this dip in activity to
occur amid offsetting pick-up in the export sectors after a sluggish
start to 2013."
RBC indicates that robust employment gains in PEI earlier in the year,
have given way to weaker labour market activity, as public sector
losses escalated this summer. Despite recent moderation, employment
remains up 2.6 per cent on a year-over-year basis in August and is
expected to be sustained by an uptick in private sector hiring before
easing in 2014.
Demographic challenges in PEI intensify, as population growth dipped to
negative territory earlier this year. RBC says that net international
migration dropped below zero in the first quarter for the first time in
over a decade, while Islanders increasingly relocated to other
provinces after 2012 recorded the largest net outflow of migrants to
other provinces in 43 years.
After a brief pause earlier this year, exports are expected to take
flight in 2014 and offset PEI's weaker domestic economy. Potatoes, the
Island's agricultural staple, are expected to support year-over-year
export gains as a firmer market for the vegetable arises in the U.S.
Export growth opportunities - such as a PEI operation winning a federal
government contract in the aerospace industry and investments directed
to expanding key provincial industries, for example fishing and wind
power - suggest activity in these sectors will continue to carry PEI to
modest growth this year and next, RBC says.
The rising tide of economic activity in the U.S. this year is expected
to lift New Brunswick's economy in 2013; however, RBC expects that the positive boost from
exports will be tempered by setbacks in the energy sector and a flat
labour market. RBC forecasts real GDP growth of just 0.8 per cent in
2013, as potentially game-changing projects in the province are not
expected to impact economic activity in the near-term.
RBC notes that nominal energy exports fell below year-ago levels,
hurting the province's international trade balance. As refinery
maintenance is expected to curb energy exports in the near-term,
continued advances in other key exports will drive economic activity
through 2014. Nominal exports of lumber increased solidly so far this
year, and RBC says they will keep the momentum as U.S housing starts
surge to a seven-year high in 2014. New Brunswick's economy will also
benefit from additional gains in electricity exports as production
issues at Point Lepreau are resolved.
"In 2014, we expect New Brunswick's rate of growth to nearly double to
1.5 per cent from further improvements in the U.S. outlook," said
Wright.
The report notes that earlier gains in New Brunswick's employment data
disappointingly gave way for further job losses over the summer. RBC
expects the province's labour market to decline for the fourth
consecutive year, easing marginally by 0.1 per cent overall in 2013.
"Despite the setback in New Brunswick's employment picture this year, we
remain confident that job prospects will improve in 2014, once the
economy is on a more firm, upward track," added Wright.
The RBC report notes retail sales rebounded in the first half of the
year from the lows at 2012's end. Despite the rebound, however, retail
sales continue to track below 2012 levels during most of the year to
date, and RBC expects retail sales to grow at the slowest rate in the
country both this year and next.
Following a 20 per cent annual decline in 2012, non-residential building
construction edged out its first quarterly gain in more than two years.
Advancement of the $12 billion Energy East project is expected to spur
a turnaround in confidence and capital investment in the province.
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
SOURCE RBC
