Manitoba’s economy is strengthening further in 2006, thanks to a construction boom and an expected rebound in agriculture, according to the Provincial Outlook report recently issued by the BMO Financial Group Economics Department.
“For the past few years, Manitoba has seen the weakest growth within Western Canada, and has been growing largely below the national average,” said Paul Ferley, assistant chief economist, BMO Financial Group. “But this year, Manitoba joins the party.
“Growth is forecast to reach 3.5 per cent in 2006, which will be above the national average along with the other three Western provinces.”
Manitoba’s real economic growth has averaged about 2.5 per cent annually over the past 10 years. Its well-diversified economy means that it is not subject to the large swings in economic fortunes experienced in some other provinces.
The report said Manitoba’s economic growth this year is mainly attributed to increased construction.
In Statistics Canada’s investment
intentions survey, Manitoba had the highest expected increase in construction expenditures in the country at 24.1 per cent.
Investment intentions for housing are up 6.8 per cent, and housing starts over the first part of 2006 are averaging well above levels seen last year.
“We expect the housing starts numbers to drift downward through the
remainder of the year, but they will still be strong enough to beat 2005’s level,” said Ferley.
Canada Mortgage and Housing Corporation reported that housing starts in Manitoba’s urban centres had reached 1,469 units for the first six months of the year, and increase of 23.5 per cent over the same period in 2005.
Winnipeg and the municipalities
surrounding the city accounted for over 90 per cent of the urban housing starts for the first six months of 2006, according to CMHC.
Across the province, non-residential construction investment intentions are up 36.5 per cent.
“A number of large construction projects will keep the economy humming for the next few years,” said Ferley. “These include the $665-million Red River
floodway expansion (now projected to cost upwards of $800 million), Manitoba Hydro’s new $258-million head office building in downtown Winnipeg, and a $560-million upgrade to the Winnipeg airport.”
The economy will also benefit from a rebound in the agricultural sector.
“Agriculture should put in a strong
performance in 2006, at least relative to last year,” said Ferley. “Crop conditions so far this year are generally good, compared to dismal conditions a year ago.”
Yet, there is a chance that the present dry conditions in the southeastern
portion of Manitoba may adversely affect yields. Manitoba Agriculture reported that the southeastern portion of the province has the potential for above-average yields.
Manitoba’s employment growth is accelerating and is running at about double last year’s pace, according to the BMO report. Despite rising employment, the strengthening economy is expected to draw more people into the labour force limiting the drop in the unemployment rate to 4.4 per cent in 2006.
Meanwhile, the pace of retail sales growth has slowed a bit from last year but appears to be picking up steam again.
Tempering these areas of strength, wholesale trade looks set to head into negative territory. Manufacturing shipments are up only slightly.
“But these less positive trends are not significant enough to offset the overall strength in the economy,” said Ferley.