Economies in Ontario and Quebec are likely to struggle for at least one more year, exacerbating the regional disparities among Canadian provinces, according to the Conference Board’s Provincial Outlook, Autumn 2006.

“The slowdown in the U.S. economy is adding to the woes of the export-oriented manufacturing sector in central Canada. Forestry, furniture and auto industries will feel the effects of a slipping U.S. housing market and weakening consumer spending,” said Marie-Christine Bernard, Associate Director, Provincial Outlook.

In 2006, real gross domestic product (GDP) is expected to grow by 1.8% in Ontario and 1.6% in Quebec, with modest improvements expected in both provinces next year. Still, not all is bleak for central Canadian economies. Ontario’s domestic economy will benefit from solid gains in real disposable income, as well as sturdy business investment that should offset some of the restructuring underway in the automotive industry. Retail sales in Quebec are forecast to grow strongly due to solid wage increases and provincial income tax cuts.

Western provinces will continue to thrive in 2007. Alberta’s economy is firing on all cylinders, although real GDP growth will ease from a torrid seven% this year to five% in 2007. British Columbia’s resource industries and construction sector will fuel an increase of 3.9% in real GDP this year, with growth to decelerate modestly next year.

Manitoba will enjoy solid growth of 3.3% in 2006 due to stellar performances in construction, mining and agriculture. A weak performance in the primary sector will limit Saskatchewan’s real GDP growth to 1.6% in 2006.

After a modest 2.9% gain in 2006, Newfoundland and Labrador is expected to post the fastest economic growth among the provinces in 2007 at 5.7%. The resumption of mining activities at Voisey’s Bay and the Terra Nova offshore oil field is expected to drive the improved economic performance next year.

The recent announcement that a second petroleum refinery might be developed in New Brunswick offers hopes for revived economic prospects in the Maritimes, but the outlook will remain muted until this project proceeds. Nevertheless, New Brunswick will benefit from new capital developments, which will boost real GDP growth to 2.1% in 2006 and 2.4% in 2007. Declining construction activity will negatively affect the outlooks for Nova Scotia (2.1% average growth) and Prince Edward Island (1.5%) in 2006 and 2007.

The Provincial Outlook is published quarterly.