Central Canada steps up - Scotiabank

A buoyant 2.8% expansion is forecast for Quebec this year, the strongest gain since 2002 and for Ontario, growth is expected to shift up to the 3.0% range for the first time since 2010, according to analysts at Scotiabank.

Key Quotes

“For 2018–19, however, the upbeat consumer contributing to this year’s pickup is expected become more cautious, dampening real GDP growth in both provinces.”

“Upward revisions to our early 2017 forecast of 1.7% growth for Quebec and 2.3% for Ontario have mirrored the healthy first and second quarter economic indicators reflected in each province’s quarterly Economic Accounts. Several factors have propelled their first half performance, including consumer spending.”

“Ontario indicates two consecutive quarters of real household expenditure increases exceeding 4%, and Quebec’s increases were only slightly less robust (q/q annualized). In both provinces, this accelerated spending was spurred by tourism, elevated job growth through September and a four-quarter pick-up in household income that lifted Q2 levels 5% above year-earlier reports. In addition to the enhanced Canada Child Benefit as of mid-2016, Quebec consumers are benefitting from the elimination of the province’s Health Contribution. The result: Quebec’s household saving rate for the first half of 2017 remains near 2016’s 20-year high of 5.9%, approximately double that of Ontario. Yet looking ahead, the anticipated withdrawal of monetary stimulus over the next two years combined with other regulatory tightening is expected to encourage more cautious households.”

“Quebec’s Economic Accounts for Q2 left residential construction activity during the first half of 2017 significantly below the latter half of 2016. In both provinces, indicators point to buoyant housing starts for this year, followed by decelerating new construction during 2018–19. The expected 10% two-year decline in Quebec’s starts in part is due to the weak growth anticipated in its 25–39 year-old cohort, the prime home-buying age bracket.”