Subscribe
Close
  • Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues

Renew

International Location Report: Energy and Manufacturing Drive Canada’s Economic Growth

Innovative manufacturing, energy exports, and the life sciences sector among others are playing a leading role.

Directory 2015
There are lots of reasons Canada is consistently a top G-7 performer — not only is its banking system one of the best in the world, it has a highly diversified economy, ranging from traditional industries like forestry and mining to knowledge-based sectors like information technology (IT), life sciences, and advanced manufacturing. Even with these impressive assets, Canada is also dealing with the same uneven performance in economic growth and job creation that is impacting gross domestic product (GDP) in the U.S. and other industrialized nations.

The rate of growth for the Canadian GDP slowed down in the summer of 2014, with a third-quarter gain closer to 1.8 percent than the 2.8 percent that many experts had predicted. This was, in large part, related to a reduction in manufacturing, especially automotive, as well as slight reductions in mineral and oil and gas extraction. On the positive side, significant gains were seen in real estate, wholesale trade, hospitality, and food services. Foreign trade is responsible for about 45 percent of the nation’s GDP. Therefore, Canada’s economic performance is closely tied to that of the U.S., its largest trading partner.
Most experts agree the Canadian economy will continue to gradually improve over the remainder of 2014 and into 2015, thanks in large part to increased exports of non-energy goods, including metal products, motor vehicles and parts, and aircraft equipment.
Overall, the third-quarter upswing in the U.S. economy has had a positive effect on Canada. For example, in September 2014, the Conference Board of Canada reported that more than 74,000 jobs were added in September, driving the unemployment rate down to 6.8 percent — the lowest since December 2008. Canada’s overall economic growth in 2014 is about 2.4 percent; growth has, however, varied significantly among the provinces. Alberta’s economy is moving along at a 3.9 percent clip — driven largely by its energy sector. Agricultural revenues dropped in Saskatchewan and Manitoba by almost one third in 2014 compared to the previous year, but stronger manufacturing has helped offset these losses. British Columbia, Ontario, Quebec, Nova Scotia, and New Brunswick have also recorded increases in manufacturing exports.

Most experts agree the Canadian economy will continue to gradually improve over the remainder of 2014 and into 2015, thanks in large part to increased exports of non-energy goods, including metal products, motor vehicles and parts, and aircraft equipment.

Energy Exports and a Manufacturing Rebound
The economy of western Canada has always been driven by mining, oil and gas, and other natural resources. British Columbia is exporting more minerals and energy, which has helped the province maintain a 2.8 percent growth rate. British Columbia is also developing several major liquefied natural gas (LNG) projects.

Alberta continues to be an oil and gas powerhouse, with massive private-sector investments in energy. Capital-spending projects worth more than $55 billion in the oil sands alone are under way. Crude oil production is up by almost 10 percent.

In contrast, Saskatchewan and Manitoba have experienced some reduced mining output, especially in potash. Crop production in these Prairie Provinces — especially wheat and canola — was also down about 30 percent compared to 2013, mostly due to bad weather. As a result, the provinces of Saskatchewan and Manitoba are seeing slower growth in the 1.5 –1.8 percent range.
Instead of competing directly for business, Toronto and the CTT may join forces to create a technology corridor on the Silicon-Valley scale. Both regions have unique strengths that, when combined, extend their capabilities as partners. The dynamic between Toronto and Waterloo could result in a super-cluster, similar to Silicon Valley and San Francisco.
Fortunately, manufacturing is on the rebound. In Manitoba, for example, manufacturing grew about 3 percent. Key sectors are transportation equipment (Manitoba is the largest center in North America for bus manufacturing), food manufacturing, metal fabrication, heavy machinery, and chemicals. In October 2014, Winnipeg-based New Flyer Industries announced plans to develop a zero-emission, 60-foot, battery-electric/fuel cell bus that will be integrated into the transit-bus maker’s Xcelsior X60 heavy-duty transit bus platform — a North American first.

Innovation and Technology
Ontario, with its highly diverse economy including advanced manufacturing, automotive, IT, software, and life sciences, has always been the economic engine for the Canadian economy. Improved export numbers, led by manufacturing sales that grew by 5 percent in the first half of 2014, have driven Ontario’s GDP growth of about 2.1 percent in 2014.

Toronto and the Kitchener-Waterloo-Cambridge region, about 90 minutes west of Toronto, are top-performing MSAs for economic growth, especially information and communicationsp technology (ICT). Canada’s Technology Triangle (CTT), a partnership among the cities of Cambridge, Kitchener, and Waterloo, is a vibrant ICT research and development cluster with over $20 billion in revenues annually. Toronto, home to 35 percent of Canada’s technology businesses, generates about $19 billion in revenues annually.

Instead of competing directly for business, Toronto and the CTT may join forces to create a technology corridor on the Silicon-Valley scale. Both regions have unique strengths that, when combined, extend their capabilities as partners. The dynamic between Toronto and Waterloo could result in a super-cluster, similar to Silicon Valley and San Francisco.

“The Toronto-Waterloo tech corridor is Canada’s most significant economic development opportunity,” comments Bilal Khan, managing director for OneEleven, a Toronto-based big data incubator. “The prosperity, innovation, and productivity that exists within this corridor, if properly nurtured, has the potential to make Canada a leader in the global innovation economy.”

IT is also one of the province of New Brunswick’s strong suits. Home to Xerox, Thomson Reuters, CGI, Genesys, and Xplornet, New Brunswick was named the lowest business cost location in North America in KPMG’s 2014 Competitive Alternatives study.

Life Sciences and Aerospace Clusters
Key Quebec industries are mining, lumber, paper, pharmaceuticals, life sciences, heavy machinery, electronics, food processing, and advanced manufacturing including aerospace. Quebec ranks among the largest life-sciences clusters in North America. Ten leading global pharmaceutical companies maintain operations in the province, especially for research and development or manufacturing. Increased exports in pharmaceutical products, as well as aircraft and parts, aluminum, iron ore, newsprint, and heavy trucks, have supported Quebec’s 1.7 percent GDP growth rate in 2014.
Quebec, in particular, represents a major market for transportation by airships in remote northern areas where there is an abundance of natural resources...We have received superb support and encouragement from the aerospace community and look forward to collaborating with numerous Quebec companies. Michael Dyment, President and CEO, LTA Aerostructures
The recovery of Quebec’s aerospace sector has also helped the provincial economy. More than half of the nearly $25 billion in national aerospace sales last year came from Quebec aerospace companies. Aerospace activity in Montreal continues to expand — for example, the Mahindra Group, an Indian company, will open an office in Montreal to manage its North American customers. In July, U.S.-based LTA Aerostructures, a designer of airships that deliver heavy or oversized loads, announced it would invest $90 million in a new facility in Greater Montreal, hiring about 180 workers.

“Quebec, in particular, represents a major market for transportation by airships in remote northern areas where there is an abundance of natural resources,” says Michael Dyment, president and CEO of LTA. “We have received superb support and encouragement from the aerospace community and look forward to collaborating with numerous Quebec companies.”

Natural Resources, Agriculture
Canada’s Atlantic provinces — Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland/Labrador — depend on natural resources to drive their economies. Strong energy exports from New Brunswick, Nova Scotia, and Newfoundland/Labrador contribute significantly to their economies. Development continues on Newfoundland’s $14 billion Hebron offshore oil project. BP Canada and Shell plan on spending $2 billion in exploration in coming years off the Nova Scotia coast. Nova Scotia’s economy will also get a boost from increased natural gas production from the new Deep Panuke offshore natural gas field.

Nova Scotia is also investing in innovative forestry technology that will transform the planting of new forests. A combined federal-state investment of $1.5 million will enable J.D. Irving Ltd. to complete a new facility that will produce up to four million improved seedlings per year through a process known as somatic embryogenesis.

“Over the past 20 years, we have invested more than $20 million in forest research and tree improvement,” says Jim Irving, co-chief executive officer of the company. “This new research facility will increase our research capability and contribute to other areas of scientific discovery in the years ahead.”

Nova Scotia also has well-established manufacturing industries that produce consumer goods, tires, chemicals, electronics, and aircraft. Its shipbuilding industry, recently buoyed by a $25 billion contract to build combat ships for the Canadian Navy, is expected to create hundreds of jobs in the future. The Conference Board of Canada predicts the project will boost overall real GDP in the province by 2.5 percent.

Food processing is another proven component to the economy of the Atlantic Provinces. Both Oxford Frozen Foods and Ocean Spray are expanding their food-processing facilities in New Brunswick, which is home to one of the world’s largest processors of frozen foods, McCain Foods.
Article Discussion

Follow Area Development

Share