Peter Power/The Globe and Mail
A slow but stable economic recovery has split Canada's economy into two distinct regions: the resource provinces, and the manufacturing provinces.
That divide has long existed, but it wasn't nearly as pronounced during the recession because the entire country was hurting. With stable growth now on the table, the differences between the two regions has returned.
"In some ways, we're starting to see a replay of the past decade," noted Bank of Montreal deputy chief economist Doug Porter, speaking on a conference call about the release of BMO's new Blue Book, which takes an in depth look at Canada's economic regions.
For 2011, BMO expects the Western provinces to grow their GDP by 3 to 4 per cent, while Ontario and Quebec's are expected to grow by 2.4 per cent. That difference isn't much right now, but the economy is just kicking into a higher gear. If things pick up, it could be much more pronounced.
In Alberta, the utilization of oil and gas servicing equipment is back to 2005 and 2006 levels and the labour force is tightening. That's frightened some companies, said Bill Hogg, head of BMO's Alberta commercial banking, because they believe labour was overpaid during the last bubble and input costs ran way too high.
But for Alberta's economy over all, the boom is nothing but a good thing because oil and gas accounts for 25 to 30 per cent of Alberta's GDP.
On the other hand, Ontario and Quebec aren't exactly destined for demise. During the last oil spike, the manufacturing provinces experienced some residual gains because some of the equipment used to extract resources and to service the oil and gas companies are made in Ontario and Quebec. "I do think we are going to see an echo of that" this time around, Mr. Hogg said.
Moreover, Quebec's manufacturing has already risen despite the strong dollar, with sectors like Montreal's tech and gaming industry gaming faring quite well.
Things also look promising in Newfoundland and Labrador. Mines that haven't been touched in quite some time could be re-opened, with big names like Tata Steel behind them. Vale is also constructing a new processing facility and the development of the Lower Churchill hydroelectric project should also create jobs. In fact, the province is now worried about a labour shortage because a lot of retirements are pending.
Jim Fallon, senior vice-president for Newfoundland and Labrador said a number of business expect this shortage to bring home the young workers who fled for the oil fields.
BMO's Blue Book has been modelled off of the Federal Reserve's Beige Book, which is released eight times a year and is a summary report of anecdotal comments on the U.S. economy.
Mr. Porter has spearheaded the project for BMO, and the new report will be released twice a year.
Tim Kiladze