Provincial economies are shaking off last year’s downturn with a vengeance, says the just-released TD Provincial Economic Outlook.
“There are two ingredients that have been adding particular spice to this year’s economic recoveries – booming housing markets and an abrupt ‘v-turn’ in manufacturing activity,” said Derek Burleton, senior economist at TD Bank Financial Group.
“Both of these drivers provide a hefty economic payoff, given their powerful reach to service industries,” said Burleton.
Across the country, interest rate cuts by the Bank of Canada last year continue to work their magic well into 2002, igniting a consumer buying frenzy on interest rate-sensitive goods. “While rip-roaring sales of motor vehicles so far this year have raised eyebrows, the boom in housing markets is emerging as the top story,” said Burleton.
He noted that recent and likely future rate hikes by the central bank should act to cool the pace of home sales and starts beginning in the second half of 2002. “Still, for those concerned that housing markets may be ripe for a severe downturn, they can take some solace in the fact that inventories of new and unsold homes continue to plumb the depths in most major markets, borrowing rates remain relatively low, and provincial job machines are revving up more powerfully than had been anticipated this year.”
Burleton admits that some pockets of weakness remain, namely forestry and information-technology (IT) equipment, which are tempering the speed of recovery in some regions. But, he added, “On balance, the unprecedented headway that Canadian producers made in reducing inventories to comfortable levels in 2001 means that new demand this year has promptly translated into increased production.”
The TD is predicting real GDP growth across Canada, from a high of 6.3 per cent in Newfoundland and Labrador to a low of 2.2 per cent in British Columbia.
Climbing offshore oil output will propel Newfoundland and Labrador into top spot this year, while struggling resource sectors will dampen western economies.
While 2003 growth prospects for Alberta’s economy remain among the brightest in Canada, last year’s slump in oil and gas prices is expected to delay a full-blown economic expansion in the province until the latter part of 2002, the report said.
