Western Canada to continue to outperform as agri-boom joins energy boom, say Scotiabank economists

Strong global energy demand and continued high prices, including for natural gas, oil, uranium and biofuels, will prolong the Western economic boom, according to Scotia Economics' latest Provincial Trends report.

"Energy-related investment, especially in the oil sands, will continue to fuel the Alberta expansion, supporting the manufacturing, wholesaling and construction industries," says David Hamilton, Economist, Scotiabank. Alberta's record high employment rate, generous tax rebates and massive population inflows are also expected to underpin the strongest pace of retail sales growth in the country. Critical labour shortages and cost pressures will nonetheless slow the advance from last year.

British Columbia will also remain close to the top of the pack in 2007,
aided by facility preparations and infrastructure for the 2010 Winter
Olympics, as well as large shipping port expansions. Strong commodity prices
have spurred development of mining projects across the province. B.C.'s film
industry is prospering, while tourism should benefit from the recent easing of
the Canadian dollar and new promotion initiatives leading up to the Olympics
Games.

In Saskatchewan, agricultural industries will benefit from high grain
prices and increased biofuel demand. Strong global demand is also supporting
uranium producers, while potash output should receive a boost from sizeable
idled capacity being restored, and further expansions scheduled this year.
Meanwhile, a two per cent provincial sales tax cut, low unemployment and solid
wage gains will underpin household spending.

"Manitoba has plans to aggressively expand electricity-generating
capacity, taking advantage of its large hydroelectric potential," says
Mr. Hamilton. "Multi-year federal-provincial initiatives, including expansion
of the Red River Floodway, are beefing up Manitoba's urban, rural and
municipal infrastructure. Personal income tax cuts should support healthy
consumer spending this year, while the strength in industrial activity will
spill over to the transportation and warehousing industries."

For the third year in a row, Canada is expected to post slower output
growth. Despite the continuing solid gains in the country's resource-rich
regions, manufacturing activity remains under pressure from non-stop foreign
competition, rising input costs and a strong Canadian dollar. Meanwhile,
deteriorating affordability, largely due to higher prices, is expected to put
a chill into the housing market.

Helping to pick up the slack, capital spending will provide solid
support. Not restricted to energy- and mining-rich provinces, such as
Alberta's oil sands, Saskatchewan's uranium mines or Newfoundland & Labrador's
nickel mines and offshore oilfields, non-residential construction will remain
a key source of growth in such areas as public infrastructure, sea and airport
expansions and commercial building developments, just to name a few. The
spillover effect of construction activity should also benefit other sectors.
Services should remain robust, providing solid underlying support to output
growth, as well as employment opportunities.

From a regional perspective, growth in the Western and Atlantic regions
should outpace the national average in 2007, while Central Canada lags behind.
Newfoundland & Labrador is expected to best the other provinces as its mining
sector recovers. A slowdown in non-residential construction will moderate
growth in Alberta and B.C., although the two provinces should remain at the
top of the pack. Ontario and Quebec will likely continue to face weakness in
manufacturing amid industry restructuring.

Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.


For further information: Adrienne Warren, Scotia Economics, (416)
866-4315; David Hamilton, Scotia Economics, (416) 866-4212; Deborah Spence,
Scotiabank Public Affairs, 403-254-6830, deborah.spence@scotiabank.com; or Kim
Struthers, Scotiabank Public Affairs, (778) 327-5451,
kim.struthers@scotiabank.com

source news : newswire.ca