TORONTO, June 11, 2014 /CNW/ - Atlantic Canada is positioned for
moderate economic growth in 2014, led by accelerated activity in Nova
Scotia and New Brunswick, according to the latest RBC Economics Provincial Outlook released today.
After a year of modest growth in 2013 and a disappointing decline in
2012, Nova Scotia's economy is set to accelerate in 2014, driven largely by a full year
of production at the Deep Panuke offshore natural gas field. RBC
forecasts real GDP growth to quicken to 2.2 per cent in 2014 following
an estimated 1.0 per cent in 2013.
"After reaching full production in late 2013, output at Deep Panuke is
expected to drive up growth in Nova Scotia and provide a boost to the
province's exports," said Craig Wright, senior vice-president and chief
economist, RBC. "We anticipate this will offset any weakness in the
domestic economy - particularly in the labour market after it saw a
notable pullback in 2013."
At the beginning of 2014, international merchandise exports from Nova
Scotia surged thanks to a boom in natural gas production and rising
demand for seafood products and rubber tires. The offshore energy
sector continues to look bright, RBC says, with BP launching a seismic
program this year as a part of a $1 billion exploration commitment off
the coast of Nova Scotia and Shell continuing seismic work that began
in 2013.
"A recent call for additional exploration bids along with the province
announcing funding to support firms' seismic and geological analysis in
the future indicate the energy sector will remain a key driver for
growth beyond 2014," said Wright.
The Outlook notes Nova Scotia will post four more years of deficits
before eking out a small surplus in 2017-18, according to the new
budget course charted by the province's government this spring. Despite
a weaker fiscal outlook, employment in the public sector has trended
upward since last year; however, RBC says this will likely be
insufficient to keep total employment afloat as weakness in the private
sector in 2013 continued into 2014.
"We don't anticipate a turnaround in the labour markets until 2015, with
employment growth this year expected to match the 0.4 per cent decline
in 2013," added Wright.
The Atlantic Provincial Economic Council estimates that investment in
major projects in Nova Scotia is set to reach $3.4 billion in 2014 - a
13 per cent increase from 2013. Work on the $1.5 billion Maritime Link
project is poised to accelerate with an estimated $335 million in
spending in 2014, and economic benefits stemming from the multi-year
$25 billion shipbuilding procurement contract are also expected to ramp
up.
Economic conditions remained mixed in New Brunswick at the beginning of 2014; however, RBC anticipates the provincial
economy will gain momentum through the year with real GDP accelerating
to a modest 1.0 per cent in 2014 from a meagre 0.2 per cent estimated
for 2013.
"An anticipated turnaround in goods exports has yet to materialize and
has accompanied an extended period of weakness across domestic economic
indicators," said Wright. "Still, there is positive evidence suggesting
that a stronger performance is in the cards for New Brunswick in 2014 -
notably, a rebound in private investment and related hiring gains."
RBC says the upward hiring trend that emerged in the latter half of 2013
continued into the early stages of 2014 as job gains in the private
sector and rising self-employment more than offset further pullback in
the private sector. On an industry basis, job losses in 2014 thus far
have been concentrated in the goods-producing sector, most notably in
construction.
"This pullback has not prevented activity from rising, however.
Non-residential building construction is gaining momentum and recorded
its largest year-over-year percentage gain since 2002 in the first
quarter of 2014," noted Wright.
Further gains, along with preliminary work beginning for the $450
million modernization plan for the Irving pulp and paper mill, bode
well for containing employment losses in the goods sector and for
private investment to rise in 2014 for the first time since 2008,
Wright adds.
The province's manufacturing sector continues to face challenges with
shipments plunging to a two-year low this spring. RBC says there are
reasons to be optimistic about the outlook for the province's mining
sector, however, with advances in engineering work for the Caribou mine
and mill on track for operations to begin in early 2015 and a two-year
construction phase at the Sisson Brook tungsten mine set to begin
shortly.
The outlook for the potash sector is less robust given recent production
cutbacks, RBC notes. Still, Sussex Potash's Picadilly project is
progressing with completion expected in 2014 and Atlantic Potash is
embarking on the drilling phase of its Millstream exploration program.
With nominal merchandise exports remaining below year-ago levels, RBC
says New Brunswick's exports are struggling to gain momentum so far
this year. Gains in exports of lumber products and electrical energy
are being more than offset by weakness in potash shipments and refined
petroleum oils. The province's international trade balance deteriorated
markedly to start 2014, swinging from surplus to deficit in the first
quarter for the first time since 2009.
RBC expects economic growth in Prince Edward Island to remain steady in 2014, with real GDP growth forecasted to match the estimated 2013
rate at 1.4 per cent.
"A strong tourism season and robust international exports are expected
to support steady economic growth in PEI this year," said Wright.
"However, lower capital investment and lingering weakness across
domestic economic sectors are expected to temper overall performance."
Indications of a strong tourism season are already emerging, as events
scheduled for the 150th anniversary of the 1864 Charlottetown Conference are expected to boost
the number of visitors to the province this year. While this bodes well
for accommodation and food services hiring, RBC notes overall
employment growth in the province is expected to be subdued as an
easing in public-sector hiring weighs down continued private-sector job
gains.
After reaching record levels in 2013, PEI exports surged in early 2014
as a weakening Canadian currency and strengthening global demand
supported further gains. Potato and seafood exports to the U.S. were
robust while softer sales in the U.S. for the province's aerospace and
organic chemical products were more than offset by rising sales to
France. RBC says that long-term potential exists for further gains in
the flow of international merchandise goods, with the gradual
elimination of tariffs under the South Korean trade agreement and the
agreement-in-principle with the European Union.
The PEI government's spring budget maintained a return to surplus in
2015-16 with greater fiscal restraint planned as program expenditures
are set to decline across most departments. Capital investment is also
set to fall this year following the completion of the $60-million
Hermanville wind farm in 2013.
On the domestic side, RBC notes population growth in PEI edged higher to
start 2014 after slowing to a six-year low in 2013. Gains were
concentrated in the 65 and older age cohort with further declines
across the working-age cohort, however. These shifting demographics may
be weighing on demand for housing, RBC says, with the six-month trend
falling sharply since January 2013.
In the absence of a surge in crude oil production that drove Newfoundland and Labrador's economy to the top of the provincial growth rankings last year, RBC
expects real GDP growth to significantly slow in 2014 at 0.6 per cent.
"Though Newfoundland and Labrador is tapping the breaks this year, we
expect activity levels to remain elevated with the advancement of major
projects and rising capital investment taking the reins - the
province's growth will remain in positive territory," said Wright.
After rebounding strongly in 2013 from an 11-year low in 2012, crude oil
production was below year-ago levels in the early months in 2014. For
the remainder of 2014, RBC expects total production gains to be subdued
due to declining production at a majority of the province's offshore
oil fields, which should offset expected output increases at Terra
Nova.
RBC anticipates capital investment in the province's energy sector to
rise, however. The ongoing $14 billion Hebron offshore oil project and
an 18-month drilling program at Bay du Nord offshore oil discovery will
provide support. Looking ahead, a recent call for exploration bids on
four offshore parcels could potentially spur additional oil and gas
investment, RBC says.
The Outlook notes the province's mining sector will not see an imminent
upswing this year as iron ore prices have surprised on the downside and
production has been weighed down by severe winter weather. Still, RBC
expects improving prospects beyond 2014 as major projects in the sector
continue to advance, particularly the anticipated mid-year completion
of the Iron Ore Company of Canada's concentrate facility expansion and
subsequent expected rising production levels.
RBC says public-sector employment in Newfoundland and Labrador has
trended downward with recent easing in private-sector hiring
compounding the effect on the overall labour market. Employment in the
goods-producing sector has disappointed so far this year and should
receive support from increasing labour needs as major projects in the
province advance, such as preparation work for the Labrador-Island
Transmission link and the expected peak in employment in 2015 for the
broader Muskrat Falls hydro-electric project.
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
