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Manitoba to regain momentum in the first half of 2012 following late 2011 pause

10/14/2011 by John Clinkard

Following a relatively strong start, there is evidence that the Manitoba economy has lost momentum midway through 2011.

This observation is based on the fact that over the past twelve months employment growth in the province has slowed from 1.5% y/y to just 0.1% y/y in August, its slowest rate of increase since December of 2009.

This marked slowdown in total job growth appears to have been primarily caused by declines in public sector employment (-3,100) as well as in self employment (-2,500).

Over the past twelve months, the major source of new jobs has been the private sector. Since August of 2010 it has increased by 7,100 largely due to significant job gains in finance, insurance and real estate (+5,200), accommodation and food services (+3,200), transportation and warehousing (+2,700) and construction (+2,300).

Turning to the key components of domestic demand, despite the relatively subdued pattern of total employment, consumer spending, reflected by growth of retail sales, is up by 4.0% year to date in July while housing demand, reflected by existing home sales is up by 5.9% over the same period.

Based on the pattern of non-residential construction, the volume of investment spending (private and public) has also exhibited strong (+12.3%) growth during the first half of the year due to an 83.4% increase in spending on industrial projects, followed by a 24.9% year-to-date rise in institutional investment spending.

Although the United States is the major market (approx. 60%) for Manitoba exports, by far the majority (82%) of the 14% year to date gain in foreign sales in 2011 has been to countries outside North America.

Looking forward, the recent decline in the Conference Board in Canada’s Help Wanted Index in September, together with a marked erosion of consumer confidence in August point to a more gradual pace of consumer spending and of overall domestic demand heading into 2012.

Further, the prospect for subpar growth globally, particularly in the United States, will probably put a lid on Manitoba’s export growth over the next few quarters.

Despite the recent moderating pattern of output, Manitoba’s economy should grow by 2.2% in 2011 compared to 2.0% in 2010. Assuming that the global/US economy picks up strength in the first half of next year and that more favourable growing conditions contribute to an increase in agricultural output, growth for 2012 as a whole should average in the range of 2.5% to 3.0%.

“Real” Gross Domestic Product (GDP) growth - Manitoba vs. Total Canada
“Real” Gross Domestic Product (GDP) growth - Manitoba vs. Total Canada
“Real” means after deflation by a price index.
Source of actuals: Statistics Canada/Forecasts - CanaData/Chart: Reed Construction Data, CanaData.

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