These are stories Report on Business is following Tuesday, June 17, 2014.
Where the provinces stand
Oil-rich Alberta will lead Canada’s economy over the next couple of years as British Columbia and Manitoba also gather steam. But the country’s industrial heartland will continue to lag, a new study suggests.
What’s more, the Conference Board of Canada warned the manufacturing-heavy provinces of Ontario and Quebec in its report today that they still face “their fair share of challenges” where provincial finances are concerned.
Interesting, too, is that while British Columbia’s fortunes are improving, Canada’s westernmost province remains “in the shadow” of Alberta.
The Conference Board also cited an “unprecedented influx of migrants” to Alberta, with a record addition of 102,000 people last year. That will fall this year, however, as other economies improve, though there will still be a “strain” on the jobs market.
“Alberta continues to be a magnet for out-of-province and international workers, but a gradual improvement in the economies of British Columbia, Quebec, and Ontario will slow the number of people relocating to Alberta,” the study said.
“Low financing rates will also help the federal and most provincial governments manage their growing debt levels,” the report added.
“Despite the low rates, however, the latest federal and provincial budgets suggest that overall government spending will remain frugal, expanding at a pace well below GDP growth through to the end of the medium term,” said the report by Marie-Christine Bernard, the group’s associate direct, provincial and territorial forecast.
“But whether provincial governments can stick to their plans in the face of growing pressures on their health care budgets remains to be seen.”
Highlights of the Conference Board report, from west to east:
British Columbia is “gaining momentum despite soft investment,” with the economy projected to expand by 2.3 per cent this year and 2.9 per cent in 2015, helped by a strong forestry sector buoyed by new home construction in the United States.
Alberta’s future growth will “depend increasingly on exports and consumer spending,” with growth this year of 3.5 per cent and next year of 3.1 per cent, for the fifth year in a row of better than 3 per cent. At the same time, the the housing market will stay strong, with rising prices.
Saskatchewan, one of Canada’s leaders, will slow its pace this year, to just 0.8 per cent as potash mining remains “under pressure” and “after a bumper crop last year, agriculture will fall back to levels more in line with historical averages.”
Manitoba will see “steady growth,” though some industries are challenged. Its economy will expand by 2.1 per cent this year, and 2.8 per cent next.
Ontario will continue to lag, with economic growth of just 1.8 per cent this year, though picking up to 2.7 per cent in 2015, helped along by stronger exports given the weaker Canadian dollar. “Ontario’s fiscal struggles continue, and the province’s budgetary situation remains immensely challenging.”
Quebec, too, will lag, its economy growing just 1.7 per cent this year and 2.3 per cent in 2015. “The new Liberal government says it recognizes the importance of putting in place fiscal measures that will allow the province to return to a balanced budget in 2015-16. That means tight control on government spending.”
New Brunswick is emerging from “the doldrums,” though growth will be just a moderate 1.1 per cent in 2014, with a pickup to 2 per cent next year.
Resources will give Nova Scotia a lift after “struggling the last three years with a listless domestic economy.” Growth should come in at 2.3 per cent in 2014 and 2.5 per cent in 2015.
Prince Edward Island has a “rebound in sight,” with the economy expanding 1.3 per cent and 2.4 per cent over the next two years, boosted by construction and agriculture.
Newfoundland and Labrador led the country last year given oil production and investment. “But, like many economies dependent on natural resources, economic growth can be volatile.” Construction will contract, and its economy will grow by just 0.5 per cent this year and 1.1 per cent next.
Canada approves Northern Gateway
The Canadian government today approved construction of the proposed $7.9-billion Northern Gateway pipeline, setting up a battle in British Columbia with opponents who vow to use every means possible to block it.
In releasing the much-anticipated decision after North American markets closed, Natural Resources Minister Greg Rickford said the government accepted the advice of a federal review panel that recommended in December cabinet approve Enbridge Inc.’s project, subject to the company meeting 209 conditions covering safety, environmental protection and consultations with local communities, including First Nations.
Prime Minister Stephen Harper has long argued that Canada must have access to west coast ports for its booming oil sands industry, a conviction that hardened after the Obama administration delayed a decision on whether to approve the Keystone XL pipeline from Alberta to the U.S. Gulf Coast, The Globe and Mail's Shawn McCarthy and Steven Chase report.
In a statement, Mr. Rickford said Enbridge must demonstrate how it will meet the conditions and must undertake further consultations with First Nations.
- Shawn McCarthy and Steven Chase: Ottawa approves Northern Gateway pipeline
- David Parkinson in ROB Insight (for subscribers): Gateway needs much more than this rubber stamp
- Shawn McCarthy: With pipeline decision imminent, deadlines mount for Enbridge
- Shawn McCarthy: Political fight far from over as Ottawa poised to rule on Northern Gateway
- As Northern Gateway decision looms, what's at stake for five key players
- Kelly Cryderman and Brent Jang: Enbridge works to fix a dented brand
U.S. inflation speeds up
As Jennifer Lee puts it, we’re seeing more signs today “that the days of low inflation are behind us.”
The senior economist at BMO Nesbitt Burns was referring to today’s report that showed consumer prices rising faster than expected last month, by 0.4 per cent, bringing the annual inflation rate to 2.1 per cent, the fastest pace since the fall of 2011.
Food prices rose 0.5 per cent for the fastest rate since early 2011.
“This isn’t a shock as not only did the California drought push fruit prices up, coffee prices have brewed strongly on Brazil’s drought, and beef/cattle have been herded higher,” she said.
Even so-called core prices, which strip out volatile items and help guide a central bank, hit the 2-per-cent mark, up from April’s 1.8 per cent.
Which will play a role in the Federal Reserve’s two-day meeting that began today.
While no change is expected from the U.S. central bank when it announces its decision, other than a continuing pullback in its quantitative easing stimulus program, the Fed “will have to acknowledge in tomorrow’s policy statement that price pressures are building,” said Capital Economics.
Calgary businessman in big donation
The University of Calgary will receive $100-million – one of the largest philanthropic gifts ever given to a Canadian university – from a Calgary businessman who wants the money to spur breakthroughs in the fields of brain and mental health, as well as infections, inflammation and chronic diseases.
Investor, economist and university alumnus Geoffrey Cumming made the announcement today with Alberta Premier Dave Hancock and university president Elizabeth Cannon, The Globe and Mail's Kelly Cryderman reports.
The province will match the donation, the biggest in the university's history, and the combined $200-million investment will establish the Cumming Medical Research Fund. The Faculty of Medicine will also be re-named the Cumming School of Medicine.
“I’ve been very lucky in life. I was born into a great country – it’s balanced and stable and safe – and I was born into a fantastic family,” he said in an interview with the Globe.
Valeant pushes Allergan
Valeant Pharmaceuticals International Inc.'s chief executive officer says takeover target Allergan Inc. should be keen to hold a shareholder vote on the proposed deal rather than trying to delay it.
Botox-maker Allergan has rejected Valeant’s $54-billion (U.S.) offer, claiming among other things that it is better off as a stand-alone company. But Valeant CEO Michael Pearson said on a conference call today that the company’s attempts to delay a shareholder vote doesn’t follow from that assertion, The Globe and Mail's Bertrand Marotte reports.
“If Allergan was as confident as they claim to be they should be happy to have a shareholder vote right away,” Mr. Pearson said on a conference call.
Mr. Pearson also said on the call that “hostile is not our preferred approach” but that he believes Allergan shareholders will ultimately vote yes on the proposed transaction.
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