Provincial and city economic performances

Source: Exec Digital Canada

Date :9/5/2007 8:59:12 AM

The Canadian economy is at a high level. Real Gross Domestic Product in Canada is expected to grow +2.6% in 2007 and +2.7% in 2008.

10 Key Economic Factors

The following assesses provinces and cities in western Canada based on ten criteria:

- employment growth (determines income, confidence and population change)

- unemployment rate

- retail sales (a proxy for consumer spending)

- housing starts

- change in home prices (based on the new housing price index)

- office vacancy rates

- inflation rate

- outlook for major industries

- CanaData construction starts

- upcoming large construction projects

Manitoba’s unemployment rate is 4.6%. All of the provinces in western Canada have unemployment rates below 5.0% (while all of the provinces in the East have unemployment rates of 6.5% or higher). Winnipeg (+2.5%) is providing jobs faster than the nation as a whole (+2.0%) and its unemployment rate (5.1%) is lower than the national average (6.1%). Winnipeg is also seeing an upturn in its housing starts (+26%). Retail sales growth in Manitoba is among the highest in the country, at +9.1% year over year through June.

Winnipeg’s economy is a mix of firms in transportation equipment (buses and aerospace/Boeing), pharmaceuticals, finance and insurance (Great West Life), telecommunications (Global TV) and agricultural products. Manitoba Hydro is ramping up proposals for mega hydroelectric projects on the Burntwood and Nelson Rivers that flow into Hudson Bay.

The population of Saskatchewan is on the increase. There have been net interprovincial gains from Alberta, due to the strength in Saskatchewan’s resource sector that includes uranium, oil and gas (Husky’s Lloydminster upgrader), potash and agricultural products (primarily wheat, but also canola, flax, oats, barley and rye).

Year-over-year new house prices in Saskatoon (+38.6%) and Regina (+21.6%) have risen faster than in any other cities in Canada, except for the two major centers in Alberta. Housing starts in Saskatoon (+75%) and Regina (+47%) are also remarkably strong. Saskatoon is further north than Regina and closer to the province’s mineral resources. Both cities are small-population centers of around 200,000 people each.

Due to revenues from existing operations in the Oil Sands and the huge investments taking place in new facilities, Alberta leads the country according to many economic measures. The province is virtually tied with Saskatchewan in year-over-year retail sales growth at nearly +12.0%. Consumer prices in the region (+6.3%) are advancing at nearly three times the national rate (+2.2%). Calgary has the lowest office vacancy rates in the country both downtown (0.9%) and in the suburbs (3.0%). (These combine for a metro-wide rate of only 1.4%.) Edmonton has the country’s second-lowest office vacancy rate metro-wide, at 4.8%. CanaData is recording a +74% gain in the square footage of commercial building starts in Alberta so far this year versus the same period last year. Institutional starts have risen +103%.

Edmonton and Calgary are ranked 1st and 3rd among the best labor markets in Canada in a composite ranking of job growth (highest to lowest) and unemployment rates (lowest to highest). As a result, Edmonton’s house prices are up +37.0% year over year, while Calgary’s new home prices are ahead by +22.0%. However, it should be noted that these are significant decelerations from earlier year-over-year advances (+40% and +60% respectively). Housing starts have declined in Calgary (-24%) year to date, but they are still forging ahead in Edmonton (+3%) through the first six months of this year. Edmonton’s gain is all in the multi-family market.

As for upcoming construction projects, ground-breaking on a nearly two-million-square-foot remand center is scheduled for Edmonton later this year. In Calgary, several significant office towers are underway and a new $500 million head office for EnCana Corporation, labeled “The Bow”, due to its distinctive shape, is working its way through the design stage.

British Columbia mining sector has been receiving a boost from high commodity prices. The northeast of the province is strong in oil and gas. (Among resources, only forestry is struggling due to the recession in U.S. housing starts.). The ports of Vancouver and Prince Rupert are expanding to handle mushrooming trade with China and other Far Eastern nations. The high-tech sector is well represented in the suburbs of Vancouver.

Victoria (3.2%) has the lowest unemployment rate in Canada and Vancouver (4.4%) is in fifth spot. A pause in the housing markets of the two major urban centers was inevitable. At the start of this year, housing prices in Vancouver and Victoria were 50% higher than in the second-tier of cities made up of Toronto, Calgary and Edmonton. Starts of expensive single-family housing have been particularly weak so far this year, -33% in Vancouver and -28% in Victoria (-28%).

Vancouver’s office vacancy rate downtown is a low 3.2%, second only to Calgary. As a final note, from an urban perspective, British Columbia is no longer just Vancouver and Victoria. Abbotsford and Kelowna have also reached the ranks of Census Metropolitan Areas. Abbotsford (which has a similar relationship to Vancouver as Oshawa does to Toronto) has the second-tightest labor market in Canada. Kelowna is in the heart of the beautiful and temperate (Lake) Okanagan region, one of the fastest-growing tourism and retirement sites in the country.