With youthful demographics, strong educational institutions, and its diversified industrial mix, the area encompassing the Waterloo Region and Guelph should perform well as the broader North American economy remains slow, according to a new report from the BMO Capital Markets Economics Department.

“Waterloo-Guelph has developed a reputation for innovation,” says Sherry Cooper, chief economist, BMO Capital Markets. “Its entrepreneurial spirit has allowed it to reinvent itself over the years. Old companies close their doors, but new ones are continually opening up.

“Waterloo-Guelph is leading the charge from the old economy based on traditional manufacturing to the new economy based on high technology manufacturing and services,” Cooper says.

The Waterloo Region (which includes Kitchener, Waterloo, and Cambridge) and Guelph have endured a couple of challenging years. The local economy has grappled with the surge in the Canadian dollar, a pronounced drop in U.S. auto demand, and record energy prices. Along with rising competition from China, these forces have all weighed heavily on the region’s manufacturing base.

Even so, the area’s economy still enjoys solid underpinnings, with unemployment below and incomes above the provincial and national benchmarks.

“Through the second half of this year and into 2009, the area’s economy will continue to face the challenges of a high Canadian dollar and weak U.S. demand,” according Cooper. “Nonetheless, the economy should see the start of a turnaround next year, and then enter a period of strong growth by 2010. We expect real GDP growth of 0.5% in 2008, but closer to 2% next year.

“Once the current weakness passes, we expect growth in Waterloo-Guelph to exceed both the Ontario and Canadian rates over the 2009-12 period,” she says.

The region’s solid economy has proved attractive to financial advisors. In June, Richardson Partners Financial announced the opening of an office in Guelph as it continues its targeted growth in high net worth communities.