Four strong winds
The first cut at 2006 GDP data for the provinces is out today from Statscan. What blew me away was Alberta, with real GDP growth of 6.8%. That is not a typo, so let me repeat, 6.8%, as in, Chinese style growth, and more than double the national average of 2.7%. And I thought the past two years were blistering (5.4% in 2004 and 4.6% in 2005).
On the downside, outside of BC and Manitoba (with Newfoundland as the Atlantic outlier â€“ think oil, as well), growth slowed. Alberta’s bounty in oil and gas hurts in other parts of the country where energy is the main input rather than the main output.
Excerpt from The Daily follows. The provincial economic accounts document is available here.
Alberta, the economic powerhouse, led the country in economic growth for the third consecutive year in 2006. Economic growth was generally more vigorous among western provinces than in central and eastern provinces in 2006.
Overall, real gross domestic product (GDP) for Canada eased slightly from 2.9% in 2005 to 2.7% in 2006. Across the country, investment, trade and financial services all contributed as service production generally outpaced goods production.
National labour income grew 6.1% and consumer spending rose 4.1%, while home building reached a new peak in 2006.
Economic growth in Alberta (+6.8%) was more than double the national average. Alberta maintained its impressive lead over other provinces for the third consecutive year. Oil prices continued to rise throughout 2006, spurring investment in Alberta’s oil sands, which in turn benefited most areas of the economy.
As the fortunes of the western provinces hinged on resource production, Central Canada felt the pinch of high fuel prices on economic activity. In addition, a strong Canadian dollar dampened export demand and therefore goods production.
In Ontario, growth reached 1.9% in 2006, weaker than the 2.8% advance in 2005. In manufacturing, production dropped in 14 of 21 major industry groups resulting in the steepest decline in manufacturing (-3.5%) in several years. Motor vehicle producers curtailed production and parts producers were particularly hard hit by US market conditions.
The weakness in the manufacturing sector was not felt throughout the economy, as service production benefited from continued labour income strength and ongoing construction investment.
Ontario supplied many of the migrants to Alberta’s booming economy. Overall strength in the service producing industries allowed the unemployment rate to fall to 6.3%.
Quebec’s economy grew 1.7% in 2006 after posting a 2.2% increase in 2005. Production of services outpaced goods as manufacturing edged down 0.2%. The decline was muted by buoyant export markets for aerospace products. Primary metal production picked up as world prices remained high, and pharmaceutical manufacturers recovered from three years of decline.
Not all manufacturers benefited as Quebec’s forest and paper industry was hard hit with mill closures and layoffs. Exports of wood and paper products declined precipitously.
Overall, labour income remained strong, and personal expenditure built on increases of 2005.
What struck me here is the very sharp drop of industrial output in Ontario in 2006 – looking at the annual averages numbers this really bears out the story of a two stage manufacturing crisis, which is intensifying. Also struck by poor GDP numbers for Atlantic Canada, especially Nova Scotia.