How will Canada’s provincial economies perform over the next year?

Asheesh Moosapeta
Published: November 8, 2023

Last month, TD released its economic forecast for Canada’s provinces. Forecasting economic activity for the rest of 2023 and 2024, TD’s report sought to estimate each province’s economic output based on performance indicators, and wider environmental and political factors—in an attempt to better understand how Canada’s provinces will fair over the next year.

What economic indicators were considered in the report?

The TD report forecasts the following seven economic indicators:

    • Annual percentage change in Real GDP;
    • Annual percentage change in Nominal GDP;
    • Annual change in employment rate;
    • Annual unemployment rate;
    • Housing starts;
    • Annual percentage change in existing home prices; and
    • Annual percentage change in home sales.

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Below are the results by province for:

Alberta

Economic Performance:

Alberta continues to maintain its leading position in provincial GDP growth in 2023 despite the temporary reduced activity in the oil sector resulting from severe wildfires and shutdowns for general maintenance earlier in the year. Oil production fell by 15% in the second quarter, reaching its lowest since 2016. However, quick recovery in production in the fall is expected to bolster oil output growth in 2024, even with delays in the start-up of the Trans Mountain Pipeline.

Housing Performance:

Attractiveness in Alberta's housing sector is likely contributing to increased immigration, showing the second fastest growth among provinces. Affordability of housing combined with viable economic prospects, and a high number of housing starts have been key to attracting newcomers—30 percent counting as interprovincial. This increased population is key to providing support for the real estate industry in Alberta.

Labour Market Performance:

Alberta trails only PEI in employment growth for the year to date in 2023. The constant unemployment rate suggests gains in the labour force are keeping pace with employment growth in the province. However, a recent decline in job vacancies signals a peak in labor demand, suggesting a potential slowdown in hiring ahead.

Consumer Spending:

Sustained consumer demand is offsetting any negative impact on real GDP from reduced oil production. This demand is fueled by robust population growth and job creation. But with Albertans' high average debt levels, the additional tightening delivered by the Bank of Canada in mid-2023 may have had a disproportionately adverse impact leading to a potential cutback in consumer spending in coming months.

British Columbia

Economic Performance

Despite being impacted by a significant port workers strike and severe wildfires, the economy of British Columbia (B.C) hasn't seen a revision to its projected growth for the rest of 2023. This resilience can be accredited to a robust housing sector performance and sustained consumer spending. However, after matching a national economic growth rate of 1.2% in the current year, there is an expectation of a downturn in the provincial economy in 2024.

Housing Performance

The first half of 2023 saw a resurgence in the housing sector in B.C, largely due to the Bank of Canada's decision to suspend an increase in interest rates. Resale volumes in housing soared in the second quarter, exceeding all provinces with a 30% quarter-over-quarter rise, while housing listings returned to pre-pandemic levels. Despite this, with rising interest rates and persistent affordability issues, the anticipation is for the housing sector to slow in 2024, before modestly recovering in the latter half of the year.

Consumer Spending

Beginning the year with caution, consumers in the B.C province have demonstrated resilience. The second quarter witnessed a strong rebound in retail spending, after a slight dip in the prior quarter. Internal TD data suggests that robust household spending continued into July-August. However, the province's households, already burdened with the country's highest average debt and increasing interest rates, may find this spending boom to be short-lived.

Labour Market Performance

The labour market in B.C has had a noticeable deceleration. The period from January to August saw slowed job growth to only 1.3% year-on-year, trailing the national average. Expectation for the coming quarters is a continued decline in employment growth, in conjunction with a surge in labour force growth, potentially raising the province’s unemployment rate toa a high of roughly 6.4% next year.

Manitoba

Economic Performance

Manitoba is anticipated to achieve moderate economic growth from 2023-2024, firmly situated in the middle of the spectrum in comparison with other provinces. This growth is facilitated by Manitoba's significant public sector, responsible for a 2% rise in employment so far this year. However, it is predicted that public sector contributions will decline in line with provincial spending plans, as an effort to alleviate an estimated 0.2% GDP deficit. Fortunately, Manitoba has managed to sidestep some of the most severe weather-related economic impacts affecting other provinces.

Housing Performance

The real estate sector in Manitoba has shown resilience despite Bank of Canada rate hikes, demonstrated by double-digit increases in sales since May. The province did not experience the same surge in housing prices that other regions experienced during the pandemic, which preserved affordability in the market. Owing to this, notable home price growth is anticipated to continue over the remainder of 2023 and into 2024.

Labour Market Performance

While Manitoba's manufacturing sector has had a robust year, a considerable proportion of this success is due to a great gain in the transportation equipment sector, a result of improved global supply chains. However, growth rates may decline due to weaker activity as U.S. Interprovincial (between provinces) trade prospects are also expected to decrease as the economy slows down nationwide—especially in Ontario, Manitoba's primary provincial export market.

Consumer Spending

Manitoba's highly indebted households are predicted to face increased strain from rising borrowing costs, decelerating consumption in the province. Evidence of this slowdown comes from TD's internal credit and debit card data. However, the province has introduced major tax reductions in its budget, aiming to boost household incomes. This intervention, together with continued resilience in the housing market, should provide a counterbalance to decelerated consumption.

New Brunswick

Economic Performance

New Brunswick's economy is set to experience average growth in 2023 and 2024 after falling behind national growth in the 2022. Despite potential external challenges, the region’s robust population growth and resilient consumer expenditure are factors that may limit any downward pressure on economic growth.

Housing Performance

Rapid population growth, with a notable 5.4% increase in Moncton, has stimulated labour force expansion and employment opportunities. Nevertheless, a resurgence in job vacancies in recent months is revealing to some pressure points in Manitoba’s economy. Still, there is potential for above-average employment opportunities as the year concludes, which is expected to stabilize by next year.

Labour Market Performance

Workforce and employment strength have been bolstered by population growth, with figures closely following national highs. Despite recent resurfaces of vacancies, job opportunities in New Brunswick have surpassed the national count after trailing throughout the COVID-19 pandemic. It's worth noting that consistent growth in employment figures is anticipated through the end of the year before the marketplace stabilizes in 2024.

Consumer Spending

New Brunswick residents have the lowest average debt-to-GDP ratio compared to other provinces, shielding them against potential increases in borrowing costs. In addition, consumer expenditure has shown resilience amidst potential setbacks, contributing consistently to the province's economic performance. On the other hand, the expectation of higher borrowing costs could introduce potential barriers to consumer spending.

Newfoundland and Labrador

Economic Performance

Newfoundland and Labrador's (NL) real GDP contracted last year, largely due to weak activities in the oil and mining sector, marking it as the only province to experience regression. The oil and mining sector’s stagnant performance will continue to drive underperformance compared to the rest of the country in 2023, with hopes of a more substantial growth surge in 2024.

Housing Performance

The oil sector's recovery was dependent on the Terra Nova restart, but this has been delayed to the following year, stunting expected growth. Anticipated enhancements in NL's crude production has suffered from this setback as well as planned maintenance to White Rose and Hebron, with oil and gas output making up almost 30% of the total provincial GDP.

Labour Market Performance

The mining sector experienced a steep rollback in prices for iron ore, nickel, and copper compared to last year's peak. This adversely affected mineral shipments, causing an expected decline of 10-15% for 2023. Despite this setback, the mining sector remains a medium-term growth prospect with mineral exploration expenditure hitting an all decade-high in 2022 reaching $243 million.

Consumer Spending

Despite the Bank of Canada's aggressive rate hiking campaign, domestic-oriented industries have held ground due to robust employment and population growth, which has kept consumer spending afloat. Data on credit and debit transactions show NL households surpassing all other provincial counterparts in year-to-date spending growth. Although domestic spending and job gains will likely slow in the coming months, the unemployment rate is projected to reach a record low this year.

Nova Scotia

Economic Performance

In Nova Scotia, population growth continues at an unprecedented pace, supporting GDP growth projections that surpass Canada's overall growth. This growth is fueled by massive immigration and increases in non-permanent residents, as well as intra-country migration. However, challenges such as the impact of the Bank of Canada’s interest rate hiking campaign on consumers and a weaker trade environment may slow future growth.

Housing Performance

Nova Scotia's robust population growth has spurred the construction sector and maintained high demand for housing. Home prices were about 70% higher than their pre-pandemic levels in August and continue to increase even as the Bank of Canada raises rates.

Labour Market Performance

The impressive population gains in Nova Scotia have provided companies with a larger pool of potential employees, resulting in considerable employment gains and a looser job market than other parts of Canada.

Consumer Spending

Consumer spending has remained strong in Nova Scotia, which has welcomed approximately 40,000 new potential consumers in the past year. However, consumption is expected to moderate in the second half of this year and in 2024 due to the effect of the Bank of Canada’s interest rate increases.

Ontario

Economic Performance

The economic growth in Ontario began with a high-powered start this year. However, there was a noticeable deceleration during the second quarter. Despite this, Ontario still achieved slightly better performance than the overall Canadian economy between April and June, due to energised housing market activity, reliable job growth, and export strength.

Housing Performance

Rapid population growth has pushed Ontario to multi-decade highs, driven significantly by immigrants and non-permanent residents. Yet, the province has witnessed the most significant drop in home sales since the Bank of Canada began raising rates in June, with a 14% decrease. Looking ahead, average home prices are expected to stabilize in the third quarter and then decrease towards the end of the year. While a rebound in home sales and prices is expected in 2024 as interest rates drop, it will likely be constrained by the worst affordability levels in at least 35 years.

Labour Market Performance

The labor market in Ontario is likely to face challenges due to projected reductions in manufacturing exports and lower auto assemblies next year. These reductions will be the result of decreased international demand and factory shutdowns for retooling for electric vehicle production. Despite these challenges, the future shows promise with anticipated growth in automotive parts manufacturing in 2023 and 2024, particularly with the opening of the Windsor EV battery plant.

Consumer Spending

In the short term, household incomes and spending have been supplemented by government support payments, and consumption has seen a boost from increased auto sales. However, rising debt servicing charges are testing the resilience of household spending due to high levels of debt among Ontario’s households. In the coming year, these households will need to use significant portions of their income for debt servicing, which is expected to weaken consumer spending, thereby limiting the province's growth prospects.

Prince Edward Island

Economic Performance

Prince Edward Island (PEI) has seen significant population growth, which is a main driving factor behind the province’s strong performance this year. This growth, largely due to an influx of younger international arrivals, is reversing the prevailing national trend of an ageing demographic. This trend, along with other contributions, has had a transformative impact on the province's resilience.

Housing Performance

The influx of arrivals has left a significant mark on PEI’s housing market. Rentals have seen a 30% increase since the early part of 2016, largely driven by international students. Moreover, the population growth has helped maintain residential prices at about 40% above their pre-pandemic level.

Labour Market Performance

The labor market in PEI has benefited significantly from the new arrivals. Employment in the province has seen the second fastest growth nationwide. Despite the predicted slowdown in household spending, there is likely to be robust hiring due to the increased population and the demands arising from it.

Consumer Spending

The steady growth of PEI's population has also given rise to increased household spending. Internal TD card spending data shows an inflation-adjusted gain of about 7% in 2023. However, an expected increase in borrowing costs could reduce consumption, which could, in turn, impact hiring and increase the unemployment rate.

Quebec

Economic Performance

Quebec's economy experienced a notable setback in the second quarter of 2023, with its GDP likely declining more significantly than the minor dip seen at the nationwide level. This downturn can be partly attributed to the slump in the mining sector, due to wildfires. Optimistically, a recovery in activity in this sector is expected soon, given the ongoing fiscal support payments that are boosting household incomes and consumption.

Housing Performance

The housing sector in Quebec has considerably slowed its growth since the second half of the previous year. Despite moderate population growth, residential construction has been reduced following a period of robust activity. Home sales have also declined due to high borrowing costs, affecting the residential building sector. This lackluster performance is likely to continue into the next year.

Labour Market Performance

The weakness in Quebec's housing sector has also partly affected the manufacturing sector, another main driver of Quebec's economic growth. Decreased production of materials used in the construction industry, such as wood, mineral and metal products, along with softer external demand for goods, suggests a challenging outlook for these sectors, representing about 15% of Quebec's GDP. The unemployment rate in Quebec, although the lowest in the country, is expected to increase due to weak economic growth.

Consumer Spending

Consumer spending in Quebec could potentially decline due to higher borrowing costs and the cooling job market. Quebecers had previously withdrawn from their savings to continue their strong consumption habits, but this is now anticipated to slow. Notably, consumption is not being equally supported by population growth in Quebec compared to other parts of Canada, a trend which is likely to continue in the coming years.

Saskatchewan

Economic Performance

The economic performance of Saskatchewan in 2023 is marked by a significant economic markdown of 1.1 percent, amounting to a GDP growth estimate of 1.3%. This makes the province's economic growth the weakest amongst its counterparts. Indeed, this year’s GDP estimate is approximately on par with the national average. However, the province is expected to bounce back and spearhead growth amongst provinces in 2024.

Housing Performance

In Saskatchewan's housing sector, affordability is relatively favourable compared to other provinces. This is important in bolstering demand, notwithstanding that the housing sector's contribution to the overall economy per se isn't directly addressed in the passage.

Labour Market Performance

Saskatchewan’s labour market has underperformed, with tepid employment growth translating into relatively weak consumer spending. Furthermore, principal crop production, a significant employment category, is expected to fall by about 20%, largely due to unfavourable growing conditions, and this has the potential to impact employment in the sector.

Consumer Spending

The consumer spending outlook for Saskatchewan is significantly tied to employment growth, which has, at least for this year, been rather uninspiring. Consumer spending has been weak thus realization, but there is hope pinned on the province's economy bouncing back next year following an expected surge in activity commencing in 2024.

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