Each province will benefit from this year’s economic upturn according to a report released Thursday by BMO Financial Group.

Newfoundland and Labrador will lead the pack in 2002, but even British Columbia, the province expected to have the slowest growth rate, will see an improvement from its 2001 pace.

“Canada’s economy has been powered by booming growth in residential construction, robust increases in consumer outlays on durables and semi-durables, and continued improvement in trade,” said Tim O’Neill, chief economist, BMO Financial Group, in a release.

“Ontario, Quebec, and Manitoba are still expected to experience the strongest bounce in economic growth. However, a meaningful improvement in the manufacturing sector will likely have to wait for later this year and in 2003,” he added.

Growth in Atlantic Canada will be more than double that of 2001. Newfoundland and Labrador will be the leader this year with a 6.5% growth rate. Economies in the other Atlantic provinces are also expected to accelerate, with the improvement in the key regional sectors of fishing, food processing, and tourism.

Strong job creation and broad-based domestic spending growth is projected to push Quebec’s growth rate to 4.3%, slightly better than Ontario at 3.9%, and Manitoba at 3.8%.

In Western Canada, Alberta will be the growth leader in the 2003-2006 period, spurred by energy and energy-related industries.

British Columbia’s economy is enjoying a modest improvement in activity this year but faces the headwinds of soft U.S. and Japanese markets. In the medium term, the provincial economy should be able to establish economic growth a little above 3%, about half a percentage point below the national average.

Meanwhile, Saskatchewan’s economy is struggling to regain some of its drought-induced losses in 2001. Growing conditions remain extremely poor in some regions of the province and overall economic growth in the province is likely to be modest this year.

BMO’s regional outlook is based on a projection that the U.S. economy will grow by 2.5% this year, down from 3.3% assumed in the May forecast. The U.S. economy is projected to grow 3.5% annually over the 2004 to 2006 period with next year’s growth rate being pegged at 4.1%.

Canada’s growth is expected to outpace that of the U.S. in the early part of the forecast period — 3.8% this year and 4.7% in 2003 — and then match U.S. growth in the latter years of the forecast. Oil and gas prices are assumed to soften later this year but then rise over the rest of the forecast.