Construction Forecasts

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Sub par U.S. growth puts a damper on New Brunswick’s near term prospects

09/16/2011 by John Clinkard

Approaching the final quarter of 2011, it is clear that the New Brunswick economy has lost considerable momentum since the beginning of the year.

Indeed during the first seven months of 2011, total employment in the province has fallen by 6,100 compared to a decline of 3,100 during the same period in 2010.

More sobering is the fact that, year to date, full time employment in the province is down by 10,400 more than twice the 3,500 drop that it exhibited during the first seven months of 2010.

Reflecting weakness in both residential and non-residential building, employment in construction has dropped by 1,500, while the number of jobs in the forestry industry has fallen by 2,200 due to a sharp slowing in lumber exports. This is primarily due to the persisting weakness in US housing demand.

Moreover, since January the volume of existing homes sold is down by 1.4% while the average house price in the province was up by a modest 1.5%.

Looking forward, New Brunswick’s near term prospects are overshadowed by the very guarded outlook for the U.S. — the market for over 85% of its exports.

Having said this, the province should get a much needed boost from its resource sector due to sustained growth of exports of potash which contributed to a 36.7% y/y gain in foreign sales of industrial materials in June.

Also, the expansion of Potash Corp’s Sussex Mine, to be completed in 2013, should give a major boost to the province’s total exports of industrial materials as production at the mine escalates to full capacity in 2015.

On balance the near term outlook for both consumer spending and housing demand in the province through the end of 2011 is rather weak given the year-to-date decline in full-time employment and the persisting impact of the phasing out of government stimulus spending.

For the year as a whole, growth in the province is projected to average in the range of 1.5% to 2% compared to 2.8% in 2010.

Assuming the US economy gains some momentum through 2012, growth in New Brunswick should move into the range of 2.0% to 2.5%.

Gross Domestic Product (GDP) growth - New Brunswick vs. Total Canada
Gross Domestic Product (GDP) growth - New Brunswick vs. Total Canada
Source of actuals: Statistics Canada/Forecasts - CanaData/Chart: Reed Construction Data, CanaData.


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