All eyes are on international trade as we head into 2014. If we as a country are going to chalk up decent growth numbers, external activity is going to have to punch above its weight. Conditions seem favourable for a growth acceleration but will all of Canada’s provinces cash in on the growth?
Generally speaking, those conditions are positive for all provinces. Which of them won’t benefit from an upswing in U.S. growth, a sustained gentle decline in the Canadian dollar or strong international demand for Canada’s primary resources? Even so, growth patterns across the land vary considerably as the pricing environment, one-off market factors and supply conditions alter short-run prospects.
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On top of the rankings for 2014 is British Columbia. Its forestry sector is reaping the bonanza fuelled by the revival of the U.S. housing market, which has boosted new home construction and renovation activity. But it’s not the only game in town; new mines are the prime reason behind double-digit gains in industrial goods exports. At the same time, energy exports will rebound, thanks to improved demand for coal and rising natural gas prices. Broadly-based growth makes B.C. Canada’s all-rounder.
All other provinces will see single-digit growth next year. Nova Scotia gets credit for the most even growth profile, sporting decent back-to-back 7% gains. The big driver of growth this year is the forestry sector, thanks to the restart of the NewPage paper mill in Port Hawkesbury. Next year’s result is largely due to surging Deep Panuke gas production. Growth is more modest than average in all other sectors.
The prize for the greatest one-year improvement goes to Prince Edward Island, which will see growth go from 1% this year to 6% in 2014. Key to this is a turnaround in the machinery and equipment and aerospace sectors, both strongly tied to the improvement in U.S. demand. The agri-food sector will also do well, thanks to decent production and strong global demand conditions.
Canada’s “middle” economies will also occupy middle ground in the growth rankings. Export activity in Quebec, Ontario and Manitoba will hug the national average, as a diversified industrial base ramps up, thanks to increased global growth. None of the provinces has a particularly bad-news story, with most industries varying modestly around overall average performance.
Outright declines in activity are non-existent at the provincial level. Deceleration in growth is also rare, but it will affect two of the provinces next year. Saskatchewan will see growth ease back from 4% to 2%, solely the result of the sharp decline in global potash prices. Alberta’s deceleration is largely due to growth in the energy sector that will not be as rapid as in 2013. A sharp slowing will hit petrochemicals and minerals exports at the same time as pricing reins in agri-food sector growth.
While provincial growth looks like a tableau of winners, losers and average-growth provinces, it is important to note that in most cases, weaker-growth sectors are actually dealing with a softer pricing environment in the resources industries. Oil and gas, base metals and certain agricultural products are coming off highs, and some markets are in retreat as hints of tighter monetary policy are weighing on certain asset classes. A key exception is the auto sector, where tight supply is limiting growth.
The bottom line? Canada’s export sector will be accelerating in 2014 as world growth ramps up, leading the charge for the economy as a whole. Few industries will be left out of this dynamism, and from the current vantage point, it looks like all provinces will capture a share of the action.
Peter G. Hall is vice-president and chief economist at Export Development Canada.