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Western Canada: Leading Out of the Recession

Driven by natural resources and a knowledge-based work force, the resurgence of Manitoba, Saskatchewan, Alberta, and British Columbia is good news for the Canadian economy.

September 2010
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Manitoba handled the recession fairly well, recording its fourth straight year of above-average growth. Although overall provincial GDP growth was estimated at -0.1 percent, higher capital spending and a more robust manufacturing sector helped Manitoba outperform the national economy, which declined 2.5 percent.

With the employment market and consumer spending improving this year, Manitoba's economic growth is expected to climb 2.9 percent in 2010, according to Royal Bank of Canada (RBC) Economics. "Growth is expected to continue as gradual improvements in the manufacturing sector take hold, with increasing demand for key Manitoba products in the transportation and machinery equipment areas," says Craig Wright, senior vice president and chief economist for RBC.

To help manufacturers become more competitive, the federal and provincial governments will launch a Virtual Centre of Manufacturing Excellence to teach lean manufacturing principles and other advanced processes. The center will receive a $4.2 million WEPA. As the United States and other Canadian provincial economies recover in the coming year, Manitoba exports such as machinery, transportation equipment, and aerospace products will be in higher demand. Manitoba is home to the largest aerospace sector in Western Canada and is the third-largest provider of aerospace goods and services in Canada. Four major firms anchor the sector, including Aveos, which recently signed a groundbreaking agreement with Air China to service its booming aviation market.

Rich in natural resources such as coal, potash, base metals, diamonds, uranium, forestry, agriculture, oil, and gas, Saskatchewan is positioned to lead the economic resurgence in Canada as commodity markets rebound.

"Saskatchewan's economy contracted sharply in 2009 amid a steep decline in potash production," say senior economist Michael Gregory and economist Robert Kavcic with BMO Capital Markets. "However, a rebound in that sector, combined with strong energy and population trends, are poised to fuel 4.2 percent real GDP growth this year, the strongest in Canada."

This turnaround is driving the rest of Saskatchewan's sectors. Wholesale trade statistics show Saskatchewan was up 20.9 percent in March 2010 from the previous year - the biggest increase in Canada. "The rise in wholesale trade numbers signals an increasing demand for goods, both from consumers and businesses," says Ken Cheveldayoff, minister of Enterprise Saskatchewan.

This is good news for Saskatchewan's diverse manufacturing industry, which includes machinery, transportation and industrial equipment, food and beverage processing, wood products, and chemical manufacturing. Manufacturing shipments increased by 12 percent in March 2010 from March 2009 - the third highest in Canada.

"Manufacturing is one of our largest sectors and has been impacted by tough economic conditions and a high Canadian dollar," Cheveldayoff says. "It's encouraging to see the numbers on the rise. Combine that with nearly 9,000 new jobs and it's evident we are doing quite well compared to other provinces."

Higher commodity prices combined with increasing exports and employment numbers are sparking re-investment in Alberta. GDP growth, forecast at 3.1 percent for 2010, is expected to accelerate to 4.2 percent in 2011. Alberta isn't used to economic slowdowns (the last time the economy contracted was in 1986). Now - with renewed interest in Alberta's oil and gas sector reflecting better market conditions and recent changes to the province's royalty regime that restored competitiveness - land sales for oil and gas development have surged in value and acreage.

The increase in oil and gas activity, and related increases in manufacturing and professional services, have brought Alberta's unemployment rate down from 7.4 percent to 6.6 percent in June, and is holding steady. Employment grew by 30,000 between March and June. Livestock, machinery, petrochemicals, construction materials, fabricated metals, and forest products drove international sales up more than 16 percent in the first quarter of 2010. Alberta's high-tech industries, including its globally competitive aerospace sector, also gained.

"The space sector is about to open up really quickly," says Ian Mann, a University of Alberta space researcher who collaborates with NASA and is working on the THEMIS mission to study weather in space. The Universities of Alberta and Calgary collaborate with major industry players. This year the province launched a new aerospace industry strategy to develop robotics and un-manned vehicle systems, defense electronics, and aerospace geomatics.

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