City, provincial economies in flux

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This article was published 16/10/2017 (2380 days ago), so information in it may no longer be current.

The Winnipeg and Manitoba economies are about to pull a Jekyll-and-Hyde act, going from being among the country’s growth leaders in 2017 to its weakest performers in 2018, according to the latest forecast from the Conference Board of Canada.

In its Autumn Metropolitan Outlook report released on Tuesday, the Ottawa-based think-tank predicts Winnipeg will tie Saskatoon for the fourth-strongest growth this year among 13 Canadian cities, at 3.6 per cent.

It also predicts Manitoba will finish the year as one of the country’s provincial leaders with real Gross Domestic Product (GDP) growth of 2.9 per cent.

But next year will be an entirely different story. The board predicts Manitoba and its capital city will finish dead last among their peers, with economic growth of 0.3 per cent and 1.4 per cent respectively.

The fallout from going from a strong economy to a weak economy can include slower job growth, reduced consumer spending, fewer new homes being built, and a drop-off in government revenues, said Alan Arcand, associate director of the board’s Centre for Municipal Studies.

“So I think there should be concern about the slower growth outlook going forward,” he added.

In its report, the board says the projected decline in Winnipeg economic growth will be in line with slower activity provincewide.

“A decline in housing starts will take a bite out of activity in both construction and in finance, insurance, and real estate,” the document notes. “Consumer spending will also slow in step with the overall economy, which will lead to sharply slower growth in wholesale and retail trade output.”

And provincially, the mining industry will embark on a painful road of declines over the next few years, as several mines reach the end of their lives,” it says.

“Construction will also take a hit in 2018 after construction activity at the Keeyask hydroelectric generation station peaks in 2017 and the project begins to wind down Losses will be partially mitigated by construction activity that Bell will embark on as part of its takeover of Manitoba Telecom Services. But… the sector will still fall deep into negative territory.”

The board also warns the pain won’t end in 2018. Its longer-term forecast predicts provincial economic growth will be limited to between 0.8 and 1.5 per cent from 2019 to 2021, and Winnipeg will do only marginally better with growth of 1.3 to 1.5 per cent.

In Winnipeg’s case, that’s well below the historical average of about 2.0 per cent growth per year, Arcand added.

It’s not just home-grown factors that will hinder economic growth in the years ahead, he said. There also will be national and international headwinds, including:

• an aging population and escalating retirement rates, that will hamper labour force growth;

• weak productivity growth, that will slow economic growth; and

• high household debt and rising interest rates, that will curb consumer spending.

“All of these things signal slower growth going forward. This is a trend across the country. It’s just a little more dramatic in Winnipeg and in Manitoba.”

But he also noted these are some worst-case scenarios that hopefully won’t play out.

“There is a chance the impact from the decline in mining and construction activity won’t be as severe as we’re thinking,” he said. “So there is some upside risk to the outlook.”

On the positive side, the board also notes notes manufacturing activity is expected to remain fairly healthy in the near term in Winnipeg.

Despite a slower economy, local employers are also expected to keep hiring, creating about 12,170 net new jobs over 2017-18.

That situation will help reduce Winnipeg’s unemployment rate from 6.5 per cent this year to 5.5 per cent by 2021, it adds.

murray.mcneill@freepress.mb.ca