Analyzing TD’s Recent Economic Forecast for Canada’s Provinces
Last month, TD Bank released its much-anticipated economic forecast for Canada’s provinces, detailing projections for economic activity for the remainder of 2023 and into 2024. By analyzing various performance indicators alongside broader environmental and political factors, the report seeks to provide a comprehensive picture of how each province is set to fare over the next year.
Key Economic Indicators Considered
TD’s report examined seven crucial economic indicators to inform its forecasts:
- Annual percentage change in Real GDP
- Annual percentage change in Nominal GDP
- Annual change in employment rate
- Annual unemployment rate
- Housing starts
- Annual percentage change in existing home prices
- Annual percentage change in home sales
Understanding these indicators is fundamental, as they capture both macroeconomic health and provincial-specific trends crucial for stakeholders.
Provincial Insights
Alberta
Economic Performance:
Alberta holds its ground as a leader in GDP growth, despite setbacks from the oil sector due to wildfires and maintenance shutdowns. Oil production dipped by 15% in Q2, touching a low not seen since 2016. However, expected recovery in fall promises a resurgence in oil output, even amidst delays concerning the Trans Mountain Pipeline.
Housing Performance:
The housing market in Alberta draws newcomers due to its affordability and job prospects. The province shows the fastest population growth, primarily attributed to interprovincial migration, which supports the real estate sector.
Labour Market:
Alberta ranks second to PEI in employment growth for 2023. Steady gains in the labor market are mirrored by stable unemployment rates, although a decline in job vacancies hints at potential hiring slowdowns ahead.
Consumer Spending:
High consumer demand continues to buffer the real GDP, spurred by population growth and job creation. However, rising debt levels may dampen spending as the Bank of Canada tightens monetary policy.
British Columbia
Economic Performance:
Despite challenges from port strikes and wildfires, BC’s economy maintains its growth forecast due to robust housing and consumer spending. Although the growth rate matches the national average this year, a downturn is anticipated in 2024.
Housing Performance:
BC’s housing sector rebounded in early 2023, with resale volumes soaring. Yet, rising interest rates and affordability issues may cause a slowdown in this growth next year.
Labour Market Performance:
Job growth in BC has been modest, trailing behind national averages. Future expectations indicate a continued decline in employment growth and a rising unemployment rate.
Consumer Spending:
While retail spending rebounded strongly in Q2, high household debt levels may challenge future consumer expenditures.
Manitoba
Economic Performance:
Projected moderate growth in Manitoba stems from the public sector, which has been instrumental in job creation. Nevertheless, the expected reduction in public spending may impact GDP growth.
Housing Performance:
Manitoba has shown resilience in its housing market despite rate hikes, indicating confidence among buyers, and is expected to continue growing.
Labour Market:
Employment tied closely to the transportation equipment sector could face challenges from broader economic slowdowns.
Consumer Spending:
Rising borrowing costs may suppress consumption, but tax cuts aim to alleviate household burdens.
New Brunswick
Economic Performance:
New Brunswick is poised for average growth owing to strong population growth and household spending, despite external pressures.
Housing Performance:
Increased job vacancies reflect pressures in the economy, yet population growth indicates a burgeoning labor market.
Labour Market Performance:
Employment figures closely track national trends, suggesting strong labor market resilience supported by population growth.
Consumer Spending:
Household debt levels remain favorable, which aids consumer spending amidst potential borrowing rate increases.
Newfoundland and Labrador
Economic Performance:
Facing challenges, NL’s GDP contracted last year due to oil and mining sluggishness. A recovery in these sectors is vital for the province’s growth trajectory.
Housing Performance:
A delayed oil sector recovery presents challenges to growth in residential construction.
Labour Market Performance:
Mineral prices have dipped, suggesting a contraction in jobs. However, significant exploration investments could spur long-term growth.
Consumer Spending:
Despite high household expenditure growth, potential slowing in consumer spending is anticipated as economic conditions shift.
Nova Scotia
Economic Performance:
Strong population growth makes Nova Scotia’s GDP projections optimistic, despite potential slowdowns from interest hikes.
Housing Performance:
Construction activity runs high due to labor demand from immigration, sustaining home prices.
Labour Market Performance:
New population dynamics have fueled employment gains, presenting a unique opportunity compared to national trends.
Consumer Spending:
Recent consumer patterns are strong, but may temper in response to monetary policy changes.
Ontario
Economic Performance:
Initially strong growth in Ontario faced challenges mid-year, yet the economy remains buoyed by vibrant housing and job markets.
Housing Performance:
Home sales have dipped substantially, raising concerns over affordability amid relatively high prices.
Labour Market Performance:
Manufacturing faces headwinds, with anticipated contractions in employment pushing the economy into a testing phase.
Consumer Spending:
While government support temporarily boosts spending, high debt levels could limit future growth.
Prince Edward Island
Economic Performance:
Strong population growth drives PEI’s economic resilience, reversing national demographic trends toward younger populations.
Housing Performance:
A surge in demand has escalated rental and housing prices, setting them well above traditional levels.
Labour Market Performance:
New arrivals bolster the labor market, sustaining employment opportunities despite impending consumption slowdowns.
Consumer Spending:
Household expenditure continues to rise, although borrowing costs could dampen future growth.
Quebec
Economic Performance:
Quebec faces challenges from a declining GDP in its mining sector, but anticipated recovery could offer some relief.
Housing Performance:
Slower growth post-pandemic coincides with higher borrowing costs, impacting home construction and sales.
Labour Market Performance:
Economic slowdowns in manufacturing reflect broader market challenges, putting upward pressure on the unemployment rate.
Consumer Spending:
Consumption patterns risk decline as high borrowing costs coexist with dampening job market conditions.
Saskatchewan
Economic Performance:
Saskatchewan records the lowest growth rate among provinces, with GDP estimates stagnating.
Housing Performance:
A favorable affordability climate could stimulate housing demand amid an otherwise weak economic backdrop.
Labour Market Performance:
Employment challenges persist, particularly in crop production, hindering consumer spending.
Consumer Spending:
Spending prospects are dim, correlating directly with weak employment and economic growth.
Conclusion
The TD economic forecast provides vital insights into the nuanced and multifaceted economic landscapes of Canada’s provinces. With varying performances expected due to a mix of local and national influences, stakeholders today must keenly analyze these trends. As provinces navigate challenges different from one another, the outlook for consumer confidence, labor markets, and industry growth remains crucial in shaping Canada’s overall economic future. For those looking to forge opportunities in this diverse environment, understanding these dynamics will prove increasingly essential.
