News Releases

·         Alberta to lead the country in growth

·         Ontario underperforms as Quebec’s growth remains solid

·         Commodity resource boom to continue

·         Political uncertainty to plague the Canadian dollar

Continued strong demand and robust commodity prices –   combined with low interest rates and a solid global economy – will enable Canada to post the second highest GDP growth among G7 countries in 2005, second only to the U.S.  In 2006, Canada will lead the pack, tied for first place with the U.S., according to Sherry Cooper, Global Economic Strategist of BMO Financial Group and Chief Economist of BMO Nesbitt Burns.

Speaking before the Canadian Club of Montreal, Dr. Cooper said that the Canadian economy will grow at a 2.8 per cent rate in 2005, second only to the 3.3 per cent growth pace of the United States. Next year, Canada will be neck and neck with the U.S. with a 3 per cent growth pace. “Unlike the U.S., Canada has not had an economic recession in fourteen years, and no recession is in sight for the remainder of the decade,” said Dr. Cooper.

According to the Chief Economist of BMO Nesbitt Burns, Alberta will lead the country in growth in 2005 at a whopping 3.9 per cent and edging downward only slightly in 2006.  Alberta continues to benefit from high energy prices and the major investment projects in mining the oil sands and building pipelines to the West Coast.  The Quebec economy is expected to grow at annual rates of 2.6 per cent this year and 2.9 per cent in 2006.  This tops the growth in Ontario, hit hard by the auto slowdown and the lagged effects of the earlier surge in the Canadian dollar.   Ontario will grow at a meager 2.4 per cent in 2005 and 2.8 per cent next year.

“Domestic demand, notably consumer spending, will continue to drive Quebec’s economy,” said Dr. Cooper.  “Retail sales are up almost 10 per cent in the past year, helped by solid job gains and robust consumer confidence.  The provincial jobless rate is currently close to its lowest levels since the mid-1970s at just under 8 per cent.  Non-residential construction has turned positive over the past year and the housing sector remains red-hot. However, the province’s forestry and aerospace industries still face significant obstacles.”

According to Dr. Cooper, growth in the developing world will provide strong support for commodity prices, driven by China’s huge demand for pulp, cement, coal, iron ore, steel and aluminum. “This will translate into higher prices. Quebec and Canada’s top export to China is pulp, and prices there are likely to edge upward from already-high levels.”

Dr. Cooper noted that Canada will be the only G7 country to have current account and budget surpluses in the coming years.  However, the current political uncertainty and widening spread between short-end Canadian and U.S. interest rates will weaken the Canadian dollar, which is expected to hover between 77 cents (US) and 84 cents through the remainder of this year.

According to the Chief Economist of BMO Nesbitt Burns, inflation in Canada will remain moderate at 2.3 per cent in 2005. However, Dr. Cooper forecasts continuing house price inflation, albeit at a decelerating pace, with Vancouver, Calgary and Montreal leading major markets in 2004-05. Home prices in these two cities have risen roughly 13 per cent over the past twelve months.  She also notes that Canada’s home ownership rate is now at a record 67 per cent, with homeowner equity dominating household net worth, and the overall financial position of consumers remaining solid.

Corporate profits in Canada and the U.S. will slow in 2005 and 2006 but capital spending will remain strong, according to Dr. Cooper. 

Provincial Growth Rates
(All numbers are per cent changes, unless otherwise indicated)

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