TORONTO, June 3, 2015 /CNW/ - Despite a challenging outlook for
Newfoundland and Labrador, Atlantic Canada's economy as a whole is
poised for modest economic growth in 2015, according to the latest Provincial Outlook released today.
Though Nova Scotia's economy faces crosscurrents this year and next, RBC projects real GDP
for the province to grow by 1.7 per cent in 2015 and 2.0 per cent in
2016.
"Growth in Nova Scotia is expected to continue in 2015, driven by a
boost in manufacturing activity from the start of shipbuilding work.
Moreover, a positive outlook for consumer spending will support the
provincial service sector," said Craig Wright, senior vice-president
and chief economist, RBC. "These favourable developments will help
offset drag from restrained government spending and a dimmer outlook
for natural gas production."
RBC expects overall employment to rise modestly in the province this
year as faster economic growth translates into private-sector job
creation. Lower gas prices coupled with an increase in the minimum wage
will support customer spending, says RBC, which will flow through to
job creation in the service sector. Employment in manufacturing is
expected to rebound as output and exports improve. Additionally,
construction on the first of the Arctic Offshore Patrol Ships in
Halifax starting in September 2015 will launch a multi-year boom for
the industry.
Construction is poised to rebound from a soft showing in 2014, as
housing starts pick up slightly and work progresses on a number of
projects centred in Halifax including the Nova Centre, the re-decking
of the Macdonald Bridge, and the King's Wharf development.
RBC says that water infiltration issues at Deep Panuke have dimmed the
outlook for natural gas production in the province - total reserves for
the project have been marked down by 50 per cent and going forward it
may begin operating on a seasonal basis. The province's other major
natural gas development at Sable Island will likely see
depletion-related production declines.
"The energy sector will be a drag on growth in Nova Scotia this year and
next, following a strong contribution in 2014," said Wright. "Still,
energy firms are spending $2 billion on offshore exploration activity, which may set the stage for
new developments."
After growing by an estimated 0.2 per cent in 2014, RBC expects New Brunswick's economy to grow at its fastest pace in five years. RBC projects real
GDP to expand by 1.6 per cent in 2015 before slowing to 1.5 per cent in
2016.
"Economic indicators for New Brunswick have remained sluggish so far in
2015, with housing starts ebbing in the first quarter and employment
and exports yet to pick up," said Wright. "We do expect things to turn
around in the latter half of the year with investments in the mining,
manufacturing and forestry sectors expected to translate into rising
output and exports."
RBC says that after three years of declining output, New Brunswick's
mining sector is set for a comeback. Production of both metallic and
non-metallic minerals are expected to rise through 2016. Potash
production is projected to substantially increase this year, as
production ramps up at the $2.2-billion Picadilly project. Moreover,
the Caribou zinc mine commenced operations in March and is on track for
full recommissioning in the second quarter of 2015. RBC notes that the
province's long-term mining outlook remains promising as the proposed
Sisson tungsten and molybdenum project advances towards its two-year
construction phase.
The report also indicates there are reasons to be optimistic about New
Brunswick's forestry sector. Amid strengthening demand for wood
products from the U.S., an increase in the allowable cut and investment
in mills around the province are expected to support growing
production.
"We expect the rejuvenated mining and forestry sectors to help bolster
non-energy exports," added Wright.
New Brunswick's manufacturing employment is trending upward and RBC says
the sector will continue to benefit from improved competitiveness on
the back of a weaker Canadian dollar. Though construction in the
province continues to face a decline in housing starts, employment
losses in that industry will be contained by ongoing non-residential
investment activity.
After expanding by 1.4 per cent in 2014, RBC's forecast for Prince Edward Island calls for a slightly accelerated real GDP growth rate of 1.6 per cent
in 2015 and 1.7 per cent in 2016.
"Growth for PEI in 2015 is expected to be propelled by the island's
fast-growing export sector, which will continue to expand as the lower
Canadian dollar enhances competitiveness," added Wright. "In addition,
consumer spending will be supported by rising wages, lower gasoline
prices and rebounding employment."
RBC notes that since 2011, the province's merchandise exports have grown
at a faster rate than any other province, reaching the $1-billion mark
for the first time in 2014. To date in 2015, merchandise exports have
continued to surge, rising 10 per cent year-over-year in the first
quarter thanks to strong sales of industrial machinery, electrical and
electronic products, and consumer goods. Another key export for the
province - tourism - will also benefit from the lower value of the
Canadian dollar.
External sector strength will likely create jobs in PEI, RBC says,
helping to gradually revitalize the province's labour market following
a slowdown last year when employment edged down by 0.1 percent. RBC
expects job momentum to build later this year and reach cruising speed
by 2016. Job creation is expected to be sufficiently strong to reduce
the provincial unemployment rate from 10.6 per cent in 2014 to 10.2 per
cent in 2015 and 9.8 per cent in 2016.
"If employment trends the way we expect, 2016 will be the first year
that the annual unemployment rate falls into single-digits in 38
years," said Wright.
RBC's outlook for construction activity is mixed. The report notes that
there is scope for a modest pick-up in residential activity, though
non-residential construction is likely to be dampened by a drop in
public-sector capital investment. Early indicators of institutional and
government construction spending show a substantial drop in the first
quarter of 2015, with declines also registered in the industrial and
commercial segments. Real non-residential construction activity was
down 36 per cent year over year in the first quarter of 2015, which RBC
says sets a poor tone for the rest of the year.
RBC forecasts that Newfoundland and Labrador's economy will contract in 2015 and 2016, by 0.2 per cent and 0.4 per
cent, respectively. This follows an estimated 2.6 per cent decline in
2014.
"The outlook for Newfoundland's and Labrador's economy is challenging,
as the province's public sector and mining industry remain squeezed,
and construction activity eases amid lower capital investment
activity," said Wright.
Following a prolonged boom since 2008, non-residential construction
activity is set to soften going forward, as major projects begin
winding down across the province. Investment and employment related to
the construction of the Hebron offshore oil platform crested in 2014
and are expected to trend downward, as the project nears completion and
heads for first oil in 2017. RBC says some offset will come from the $7-billion Muskrat Falls hydroelectric project, as it reaches peak
construction-phase employment this year.
RBC notes that drag will also come from the residential side, as soft
labour market conditions and a declining population weigh on housing
starts with additional negative implications for construction activity.
"A dimmer outlook for construction employment has negative implications
for overall consumer incomes and will most likely contribute to
slumping retail sales in the province this year," added Wright.
In 2014, over 90 percent of Newfoundland and Labrador's merchandise
exports were related to energy and non-energy mining, and in the first
quarter of 2015 low commodity prices contributed to nominal exports
plunging 39 percent year-over-year. As the province's mining industry
grapples with low prices, it has reduced both payrolls and shipments so
far this year. RBC expects further production and employment losses
with a copper-zinc mine in central Newfoundland closing in July.
RBC says overall oil production will likely be stable over the next two
years, as lower production is offset by the start of the South White
Rose extension in mid-2015, and a major pick up in the energy sector is
expected beyond RBC's current forecast horizon in 2017, with first oil
at the Hebron 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
