In the preceding month, TD unveiled its economic forecast for Canada’s provinces, delving into economic activity projections for 2023-2024. The report intricately examines each province’s economic output, incorporating performance indicators and broader environmental and political factors. This comprehensive analysis aims to enhance understanding of how Canada’s provinces will fare over the upcoming year. Explore the insights TD provides on analyzing Canada’s provincial economic performance.
Which economic indicators were taken into account in the report?
The TD report predicts the following seven economic metrics:
Real GDP: Reflecting economic growth or contraction, it examines the annual percentage change in the Real Gross Domestic Product (GDP).
Nominal GDP: Gauging the overall value of goods and services produced, it analyzes the yearly percentage shift in Nominal GDP.
Employment Rate: Offering insights into workforce trends, it assesses the annual alteration in the employment rate.
Unemployment Rate: A crucial indicator of economic health, it signifies the percentage of the workforce without employment.
Housing Starts: Providing insights into the real estate and construction sectors, it tracks the number of new housing construction projects.
Existing Home Prices: Reflecting housing market dynamics, it examines the yearly percentage change in existing home prices.
Home Sales: Offering valuable information on real estate market dynamics, it analyzes the yearly percentage shift in home sales.
The outcomes by province are as follows:
- Saskatchewan
- Newfoundland and Labrador
- Prince Edward Island
- Manitoba
- Quebec
- Nova Scotia
- Alberta
- Ontario
- British Columbia
- New Brunswick
Alberta
Performance based on economic
Even with brief disruptions in the oil industry brought on by severe wildfires and maintenance stoppages earlier in the year, Alberta is still expected to lead the province in GDP growth in 2023. Oil production fell by 15% in the second quarter, to its lowest level since 2016. Nevertheless, despite the delays in launching the Trans Mountain Pipeline, there is an expectation for a quick recovery in production during the fall to support an increase in oil output in 2024.
Housing Sector Performance
Alberta is the second fastest-growing province in the world due to its expanding popularity in the housing sector, which has also contributed to an increase in immigration. With thirty percent of new arrivals coming via interprovincial migration, the accessibility of housing, together with favorable economic prospects and a high number of housing starts, is a major draw. The real estate sector in Alberta depends on this expanding population.
Performance of labor market
In terms of employment growth thus far in 2023, Alberta is ranked second only to Prince Edward Island. The province’s employment growth is in line with gains in the work force, as seen by the constant unemployment rate. But a recent decline in open positions points to a peak in labor demand and suggests that hiring may soon slow down.
Customer Expenditure
Any negative effects of lower oil production on real GDP are being offset by sustained consumer demand. Strong population increase and employment creation are the main drivers of this need. The extra tightening by the Bank of Canada in mid-2023, however, may have a disproportionately negative effect given the high average debt levels among Albertans. This could lead to a decline in consumer spending in the upcoming months.
British Columbia
Financial performance
Even in the face of obstacles like a significant port workers strike and intense wildfires, British Columbia‘s (B.C.) economy is expected to grow at the same rate through the end of 2023. Strong results in the property market and consistent consumer spending are credited for this resiliency. Nonetheless, following the 1.2% growth rate of the national economy this year, a decline in the province’s economy is predicted for 2024.
Housing Sector Overview
British Columbia’s housing market rebounded in the first half of 2023, mostly as a result of the Bank of Canada’s decision to stop raising interest rates. The second quarter had a significant 30% quarter-over-quarter increase in house resale activities, outpacing that of other provinces. Home listings have recovered to their pre-pandemic levels. But predictions point to a downturn in the housing market in 2024, with a gradual rebound in the second half of the year due to rising interest rates and persistent affordability issues.
Customer Expenditure
Although they took a cautious start to the year, British Columbian consumers have shown resilient. After a minor decline in the prior quarter, retail expenditure saw a strong comeback in the second quarter. According to internal TD data, households continued to spend heavily into July and August. However, families in the province, who are already contending with the highest average debt in the country and rising interest rates, might only witness a temporary increase in expenditure.
Labor Market Dynamics
British Columbia’s labor market has clearly slowed down; from January to August, job growth was only 1.3% annually, below the national average. Future forecasts indicate that employment growth would likely slow down even further in conjunction with an increase in the labor force, which could result in the province’s unemployment rate rising to about 6.4% in the future year.
Manitoba
Financial performance
Between 2023 and 2024, Manitoba’s economy is predicted to grow moderately, putting it in the center of other provinces. This year’s 2% gain in employment is mostly attributable to the public sector, which is driving this expansion. Projections, on the other hand, show a decline in public sector contributions in line with provincial spending plans in order to close a projected 0.2% GDP deficit. Thankfully, Manitoba has avoided some of the severe weather-related economic effects that other provinces have seen.
Performance in the Housing Sector
Since May, the Manitoba real estate market has experienced double-digit sales growth, demonstrating its tenacity in the face of rate hikes by the Bank of Canada. The province maintained market affordability during the pandemic by avoiding a notable spike in property prices, in contrast to neighboring regions. As a result, significant increases in property prices are anticipated to continue into 2024 and the remaining months of 2023.
Labor Market Performance in Manitoba
With improved worldwide supply chains, Manitoba’s manufacturing industry has had a successful year, especially in the transportation equipment sector. But growth rates are predicted to slow down as a result of a decline in interprovincial commerce in the United States, particularly with Ontario, Manitoba’s main provincial export market, which is predicted to undergo an economic recession.
Customer Expenditure
It is anticipated that rising borrowing costs will put more burden on Manitoba’s highly indebted residents’ finances, which will cut down consumption. This slowdown is evident in TD’s internal credit and debit card data. In spite of this, the province has significantly reduced taxes in order to raise household earnings in its budget. It is expected that this action will offset the slowdown in consumption along with the housing market’s continued resiliency.
New Brunswick
Financial Results
After trailing the national growth rate in 2022, New Brunswick is expected to see moderate economic growth in 2023 and 2024. The region’s robust population growth and resilient consumer spending may offset any negative impact on economic growth, even in the face of any external threats.
Residence Effectiveness
Rapid population growth has contributed to an increase in the work force and job prospects in New Brunswick, most notably a 5.4% increase in Moncton. But a recent spike in job openings indicates certain stress areas in the province’s economy. In spite of this, it is expected that by the next year, the possibility of above-average work possibilities will normalize.
Labor Market Outcomes
The employment and workforce picture in New Brunswick has been greatly enhanced by population growth, and it is now almost at the level of the national average. New Brunswick has overtaken the country in terms of job prospects despite recent rises in job vacancies—a significant change after falling behind during the COVID-19 pandemic. Through the end of the year, job numbers should continue to rise steadily, and in 2024, the market should stabilize.
Customer Expenditure
Residents of New Brunswick have the lowest average debt-to-GDP ratio of any province, which acts as a buffer against future increases in borrowing costs. Consumer spending has shown resilient in the face of potential setbacks and has consistently contributed to the province’s economic performance. On the other hand, the expectation of higher borrowing costs could present possible barriers to consumer spending.
Newfoundland and Labrador
Financial performance
Last year, Newfoundland and Labrador (NL) had a decline in its real GDP, which was mainly caused by weak performance in the mining and oil industries. With this setback, NL became the only province to decline. It is anticipated that the oil and mining industry will continue to perform poorly in 2023, which will contribute to the industry’s underperformance when compared to the rest of the nation. However, there are encouraging signs for a larger growth spike in 2024.
Residence Efficiency
The oil industry’s revival in Newfoundland and Labrador depended on the Terra Nova restart, which has been delayed until next year, preventing the projected expansion. This delay together with planned repairs to White Rose and Hebron have impeded expected gains in Newfoundland and Labrador’s crude production, which accounts for over 30% of the province’s GDP.
Labor Market Outcomes
From their high point in the previous year, iron ore, nickel, and copper prices have dropped sharply. The decline in mineral shipments is predicted in 2023 to be between 10% and 15%. Despite this setback, the mining sector is expected to reach a record investment in mineral exploration of $243 million in 2022.
Customer Expenditure
The Bank of Canada’s vigorous rate-hiking campaign has not been able to derail consumer spending due to strong employment and population growth. As reported by credit and debit transactions, NL households have grown their spending more than any other province in the past year. Even though there is an expectation that domestic expenditures and job growth will decline in the coming months, the unemployment rate is expected to reach a record low this year.
Nova Scotia
Performance of the economy
The province of Nova Scotia is witnessing unparalleled population expansion, which is leading to GDP estimates surpassing Canada’s national growth. Significant immigration, an increase in temporary residents, and greater internal movement are the main drivers of this expansion. Notwithstanding these encouraging developments, there remain still obstacles to overcome, such as the impact of the Bank of Canada’s rate increases on consumers and an unfavorable trade environment that may impede further expansion.
Performance of housing
Nova Scotia’s building industry has been significantly impacted by the province’s rapid population growth, which has maintained a high level of demand for houses. Home values have risen dramatically as of August, hitting levels that are almost 70% higher than what was seen before to the pandemic. Surprisingly, this rising tendency in house prices continues even after the Bank of Canada raised interest rates.
Labor Market Outcomes
Because of Nova Scotia’s exceptional population growth, businesses now have access to a larger pool of talent, which has increased employment significantly and made the labor market more laid-back than in other Canadian provinces.
Customer Expenditure
Nova Scotia has continued to see strong growth in consumer spending, helped by the arrival of about 40,000 new prospective customers in the previous year. However, forecasts indicate that consumption will moderate in 2024 and the later half of this year due to the effects of the Bank of Canada’s interest rate increases.
Ontario
Economic Status
This year, Ontario’s economic growth got off to a great start, but the second quarter saw a discernible decline. However, from April to June, Ontario’s economy did better than Canada’s as a whole. This was mostly because of the province’s dynamic housing market, steady job creation, and strong exports.
Residence Efficiency
The province of Ontario has seen a significant increase in population, with several decades-high levels attained, mostly as a result of immigration and temporary residents. But after the Bank of Canada started raising interest rates in June, the province experienced its biggest reduction in house sales, which fell by 14%. Predictions suggest that the average price of a home will level off in the third quarter and then decline as the year goes on. Even though there is a prediction that a decline in interest rates will boost home sales and prices in 2024, the most difficult affordability conditions in at least 35 years may prevent this recovery.
Employment Market Performance
The province of Ontario’s labor market is predicted to have challenges in the upcoming year, mostly as a result of projected reductions in auto assembling and industrial exports. These declines are the result of a decline in global demand as well as temporary facility closures brought on by the switch to electric vehicle manufacturing. Notwithstanding these obstacles, the future is bright since increase in the production of automotive parts is predicted for 2023 and 2024, particularly with the opening of the Windsor EV battery plant.
Spending by consumers
Government assistance payments have recently supplemented household incomes and spending, receiving an additional boost from rising auto sales. However, rising debt service costs resulting from high family debt levels in Ontario are posing a threat to the stability of household spending. Next year, there is an expectation that a significant amount of household income will be devoted to debt servicing, potentially reducing consumer spending and limiting the province’s growth possibilities.
Prince Edward Island
Economic Status
The population of Prince Edward Island (PEI) has increased significantly, which has been a major factor in the province’s strong performance this year. The growth defies the national trend of an aging demography and is mostly ascribed to an infusion of younger international arrivals. Together with other factors, this transformative movement has greatly increased the province’s resilience.
Housing Market Performance
The influx of new people has significantly impacted the housing market in Prince Edward Island. Since the start of 2016, rental rates have increased by 30%, mostly due to the influx of overseas students. Furthermore, the population increase has been instrumental in maintaining residential prices roughly 40% higher than they were prior to the pandemic.
Performance of the labor market
The newcomer population has significantly improved PEI’s labor economy. The province has had the nation’s second-fastest rate of job growth. Even with the prediction of a decline in household spending, there is a good chance that hiring will be high due to the increased population and the demands it entails.
Household Expenditure
There has been a discernible increase in household spending as a result of PEI’s population growth. Internal TD card expenditure data indicates that there will be a real-term increase in 2023 of about 7%. However, the expected increase in borrowing costs could reduce spending. This, in turn, might impact hiring and possibly raise the unemployment rate.
Quebec
Economic Status
In contrast to the minor overall fall in GDP, Quebec’s economic performance suffered a significant setback in the second quarter of 2023. A reduction in the mining industry brought on by wildfires is partially responsible for this decline. Positively, there is hope for this sector’s activities to rebound soon thanks to continuous fiscal assistance payments that are raising household incomes and stimulating spending.
Residence Efficiency
Quebec’s real estate market has witnessed a noticeable slowdown in growth since the latter part of the preceding year. Following a period of heightened activity, residential development has dwindled despite moderate population growth. Elevated financing rates have additionally contributed to a decline in home sales, impacting the residential construction sector. There is a possibility that this below-average performance will extend into the upcoming year.
Employment Market Performance
The manufacturing sector, a significant driver of economic growth in Quebec, has experienced some repercussions due to the downturn in the housing sector. The production of construction-related resources, such as metal, mineral, and wood products, has declined, and there has been a weakening of external demand for goods. These sectors, constituting 15% of Quebec’s GDP, seem to face challenges ahead. Despite currently holding the lowest unemployment rate in the nation, Quebec’s slow economic progress is likely to contribute to a potential increase in unemployment.
Household Expenditure
The slump in the housing market in Quebec has somewhat impacted the manufacturing sector, which is another important driver of the province’s economic growth. The manufacturing of building materials, including wood, mineral, and metal products, has decreased. Additionally, there has been a decrease in external demand for commodities. These industries, which account for 15% of Quebec’s GDP, are likely to face difficult times in the future. Despite having the lowest unemployment rate in the nation, higher unemployment is expected in Quebec. This is due to the province’s generally sluggish economic growth.
Spending by consumers
Because of high borrowing prices and a sluggish job market, there may be a decline in consumer expenditure in Quebec. The people of Quebec have been tapping into their savings to sustain their heavy consumption. However, there is a prediction that this tendency will slow down. Notably, in Quebec, population growth is not supporting consumption to the same extent as it is in other regions of Canada. This trend is expected to continue in the years to come.
Saskatchewan
Economic Performance
The economy of Saskatchewan is expected to experience a significant decrease in 2023, amounting to 1.1%, with a predicted GDP growth of 1.3%.
In comparison to its peers, this places the province with the weakest economic growth. Although the GDP projection for this year aligns closely with the national average, there is an anticipation of recovery, with Saskatchewan expected to lead the provinces in economic growth in 2024.
Performance of Housing
In comparison to other regions, Saskatchewan’s housing market provides a more advantageous affordability landscape. The segment may not explicitly outline how the housing industry contributes to the overall economy. Nonetheless, its role in stimulating demand is vital.
Employment Market Performance
Saskatchewan’s job market has performed poorly, with only moderate growth leading to relatively low levels of consumer expenditure. Furthermore, there is an anticipation that key crop production, a significant employer, will decrease by about 20%, primarily due to unfavorable growing conditions. This drop may impact the rate of employment in the industry.
Spending by consumers
For the current year, the consumer spending outlook in Saskatchewan closely correlates with the unimpressive growth in employment. Consumer spending has been weak thus far. However, there is hope that the province’s economy will strengthen in the coming year due to a predicted spike in activity beginning in 2024.
Conclusion
Some provinces, like Saskatchewan, face economic challenges, but there is optimism for a collective rebound, with expectations of increased economic activity in the coming year. Next year’s outlook remains optimistic, anticipating increased economic activity across Canada’s provinces.
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