Midway through the first half of 2013, a number of key indicators suggest that Quebec’s economic engine has picked up some speed despite the persisting climate of uncertainty about the health of the global economy in general and the outlook for the U.S. in particular.
Over the past twelve months through February of 2013, full-time employment in the province has increased by 108,300 compared to a gain of only 16,700 during the twelve months ending February 2012.
The solid gain in full-time hiring suggests that firms are more confident about their future prospects than they have been for several years and it is consistent with the improvement in the Business Barometer Index of the Canadian Federation of Independent Business. The CFIB’s yardstick increased by almost two points in February.
This increase in the index, reflecting a strengthening in the overall business sentiment, was accompanied by a very pronounced improvement in private sector hiring plans as a record percentage (29%) of Quebec’s small and medium enterprises indicated they planned to add staff over the next three months.
Against a background of robust full-time job growth and near record low interest rates, consumer spending — reflected by retail sales — and housing demand exhibited lackluster growth through the second half of 2012.
In the case of retail sales, strength in motor vehicles was partly offset by weak sales of electronics and appliances, food and groceries and home furnishings.
Housing demand, reflected by existing home sales, also weakened in the second half of 2012. The fact that sales have slowed despite the above noted strong fundamentals, suggests that the more restrictive mortgage lending regulations introduced by the federal government in mid-2012 markedly depressed housing demand late in 2012 and into 2013.
Following a modest 1.6% increase in 2011 and consistent with the solid gain in public and private investment intentions at the beginning of 2012, the total volume of non-residential capital spending in Quebec increased by 6.6% in 2012 primarily due to an 8.7% gain in commercial building that was complemented by a 3.7% increase in industrial construction and a 3.3% rise in institutional building.
Looking ahead, stronger growth of consumer spending and most importantly a gradual strengthening of external demand fuelled by the steady expansion of consumer spending and housing demand in the United States, plus increased global demand for aircraft and subway cars, should fuel the Quebec economy over the near term.
In addition, solid gains in applications to build non-residential building projects over the past several months should underpin both industrial and commercial construction through the first half of the year.
However, given the scaled back investment outlook indicated by the most recent (Feb/2013) Survey of Public and Private Capital Spending, the recent lackluster growth of profits and a flattening of industrial capacity utilization, growth of capital spending in Quebec should slow during the second half of the year.
Gross Domestic Product (GDP) Growth – Quebec vs Total Canada