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FREDERICTON, NEW BRUNSWICK--(Marketwire - Oct. 12, 2011) - Economic growth in New Brunswick is slowing after advancing by a robust 3.3 per cent in 2010, according to the Provincial Monitor report released today by BMO Capital Markets Economics.

"A shift from fiscal stimulus to modest restraint, along with a soft U.S. economy should hold growth to 1.5 per cent this year and 1.4 per cent in 2012," said Robert Kavcic, Economist, BMO Capital Markets.

Exports were up 20 per cent year-over-year through July, led by energy products and agriculture. "This is particularly important given that New Brunswick is the most export-dependent economy in the country; exports represent more than 70 per cent of the province's GDP with about 85 per cent heading south of the border to the U.S.," stated Mr. Kavcic.

Some major private-sector capital projects are set to wind down in 2012, including Potash Corp's $1.7 billion Sussex mine development and the $1 billion Point Lepreau nuclear plant refurbishment. Government capital investment is also poised to slow sharply after providing a major support during the recession. "Total capital spending by the Province is pegged at $593 million in fiscal 2011-2012, down from $940 million in fiscal 2010-2011 when the stimulus program was still in force," noted Mr. Kavcic. "Meantime, as U.S. growth remains soft, exports and manufacturing activity should downshift after a strong performance so far in 2011."

"While the dollar is now several cents below parity, it still remains strong relative to recent history," said Christine Cooper, District Vice-President, New Brunswick and PEI, BMO Bank of Montreal. "New Brunswick businesses still have the opportunity to take advantage and invest in their operations to improve productivity."

Consumer spending has remained firm, up 4.4 per cent year-over-year in the first half of the year. However, personal income tax reductions put in place by the previous government have been suspended, which will leave marginal rates unchanged in 2012 from lowered 2011 levels. Additionally, the top marginal rate previously in place for 2011 (12.7 per cent) was put back to the 2010 level of 14.3 per cent as of July 1^st, a move that boosted payroll deductions and could moderate consumer spending.

Spending will also be nagged by a soft labour market, which saw the jobless rate hit a high of 10.1 per cent in July, and employment drop nearly 2 per cent below year-ago levels. While manufacturing employment has been surprisingly firm, losses have been seen in construction, resources and the service sector over the past year.

New Brunswick's Public Accounts reported a deficit of $633 million in fiscal 2010-2011 (2.2 per cent of GDP), $107 million lower than the $740 million estimated in this year's Budget, reflecting higher-than-estimated revenues and lower expenses. An update on fiscal 2011-2012 is pending but in this spring's Budget, the province had projected a shortfall of $449 million this fiscal year (1.5 per cent of GDP), as well as a projected return to balance by fiscal 2014-2015.

The full Provincial Monitor report can be downloaded at bmocm.com/economics.