Mid-way through 2012, there are clear signs that the combination of weak natural gas sales and a dramatic drop in forestry production have effectively caused the Nova Scotia economy to temporarily shift into neutral.
Specifically, a steady decline in production at the Sable Island natural gas platform is largely responsible for an 87% year-over-year drop in the value of the province’s energy exports.
In addition, the closure of the NewPage Paper Mill and production cutbacks at the Bowater-Mersey Mill have caused exports of forest products to shrink by almost 50% over the past 12 months.
Largely due to this weakening in foreign sales, total employment in the province has been essentially stalled over the past year and the number of full time jobs has contracted by 1.6% (-5,600). Further, the combination of no change in employment together with sustained, steady growth of the labour force caused the unemployment rate to trend steadily higher from its recent low of 7.8% in December of 2011 to its current level of 9.6%, the highest since December of 2010.
Against this background of relatively weak job growth, the year-to-date volume of sales of existing homes in the province are up 11.2% driven primarily by a very strong 16.8% year-to-date gain of house sales in Halifax which accounts for approximately 60% of the province’s total sales.
However, despite this strong pattern of home sales, the year to date (June) volume of housing starts in the province is off by 14.5% on account of a very sharp 37.4% decline in starts of multiple units which more than offset a 19.7% year-to-date gain in single family starts. In addition, retail sales in the province were up by 0.9% m/m in May and by 2.5% year to date.
Looking forward, following a 15% year-to-date drop in the first quarter, investment in non-residential construction should make a significant contribution to growth in the short term as well as over the longer term.
In the short term, based on the most recent Statistics Canada Survey of Public and Private Investment Intentions, public and private organizations intend to boost their spending on construction and machinery and equipment by 3.8% in 2012 following a decline of 15.7% in 2011.
This outlook is consistent with the solid 9.2% year-to-date gain in the value of non-residential building permits due to a 378% year-to-date increase in the value of industrial permits and a 72.9% rise in institutional building intentions. Together these more than offset a 39% year-to-date drop in commercial construction approvals.
Looking ahead to 2013, based on the Major Project Inventory for 2012 compiled by the Atlantic Provinces Economic Council, major project spending in 2013 is expected to be flat as a drop in public sector spending is just offset by increased private sector spending on energy projects.
However, looking ahead to 2014, the provincial economy should get a very significant boost from the direct and indirect impact of the $25 billion federal government contract contract that was recently awarded to Irving Shipbuilding to build 15 warships and six patrol boats. Also, the outlook for oil and gas exploration in Nova Scotia recently brightened in the wake of the recent record bid by Shell Canada to explore for oil and gas deposits in four offshore parcels 200 km southwest of Encana’s Deep Panuke gas field.
Gross Domestic Product (GDP) Growth - Nova Scotia vs Total Canada