After years of battling declining U.S. demand in its key resources industries, particularly forestry, New Brunswick is hoping that a recovery south of the border, even if sluggish, will keep its economy growing in 2012. In recent years the rate of growth in the province has been among the lowest in the country, ahead of only last-place Nova Scotia.
A consistently high Canadian dollar has also helped keep the picture gloomy for N.B.’s vital export sectors. As a result, unemployment has remained stubbornly high, at about 9.4 %, and sectors linked to consumer spending, such as housing starts and retail sales, declined slightly last year.
However, forecasters agree that a better economic performance in the U.S. is likely to brighten the province’s economy in 2012 (close to 90% of N.B.’s energy and forestry products go to the U.S.). Robert Hogue, senior economist with Toronto-based Royal Bank of Canada, is forecasting that U.S. real gross domestic product will rise to 2.5% in 2012, up from the 1.8% increase in 2011. “As [the U.S. recovery] picks up speed, we expect to see a stronger demand for Canadian products and services,” says Hogue. RBC estimates that the province’s real GDP growth will rise to 1.8% in 2012 and 2.3% by 2013. Meanwhile, estimates from Scotia Economics, a division of Bank of Nova Scotia, predict that real GDP growth will fall in 2012 to 1.2% from its estimate of 1.4% in 2011.
Over the past few years, the jobs picture has languished in a stop-and-go type of environment, says Alex Koustas, senior economist with Scotiabank, due to larger economic trends. For instance, U.S. firms often outsource their call centres to N.B. to take advantage of a favourable exchange rate. But the strong Canadian dollar has taken a toll on that industry in recent years. Koustas notes that a general U.S. turnaround would help this industry.
Another potential bright spot is the opening of a new $4.5-million potash mine by Saint John, N.B.-based Atlantic Potash Corp., which will explore the Millstream deposit near Sussex. The opening of the mine, as well as a new call centre in the province, will create a substantial amount of new employment. In aggregate, 4,000 new jobs will be created in N.B. over the next year, according to Jacques Marcil, senior economist with Toronto-Dominion Bank.
The same cannot be said of public infrastructure spending, which will decline as the government cuts back on its stimulus spending — about $1.6 billion in 2009. Says Hogue: “Funds used to prop up the economy are no longer available and future growth will depend on the private sector.”
The outlook for housing remains gloomy. Hogue forecasts housing starts will fall slightly to 3,200 units in 2012 from 3,300 in 2011. “Housing will only improve once there are stronger demographics to justify more units,” he says.
On the other hand, Marcil remains optimistic that housing starts will improve along with the labour market. He is calling for housing starts to rise to 3,400 in 2012. However, he expects retail sales to decline, given the uncertain outlook. IE