When Statistics Canada tells us that the GDP is growing by an average annual rate of 2.8 per cent, the headline figure hides two very different regional stories. The economy of Western Canada — especially Alberta's — is, to put it mildly, on fire. Central Canada's, on the other hand, is not.
The "West and the rest" split isn't a particularly new phenomenon. But it's startling to see just how many economic yardsticks that regional split pervades.
And it's a complete reversal of the situation just four years ago, when Ontario's economy was boosted by growth in investment and manufacturing and many western provinces trailed the national average.
It all makes for a tricky balancing act for the Bank of Canada, which has to decide whether to raise interest rates to rein in inflationary pressures (something it might do if the Alberta boom was nationwide) or cut interest rates to stimulate growth (which it might do if Central Canada's sluggishness was nationwide).
Let's look at how the main economic measures are playing out amid those big regional differences:
| Annual change | |
|---|---|
| Canada | 2.9% |
| Nfld. | 3.6% |
| P.E.I. | 1.8% |
| Nova Scotia | 2.4% |
| New Brunswick | 2.9% |
| Quebec | 1.9% |
| Ontario | 1.8% |
| Manitoba | 2.7% |
| Saskatchewan | 2.7% |
| Alberta | 6.8% |
| British Columbia | 4.0% |
GDP
In September, a study in the Canadian Economic Observer chronicled the "economic juggernaut" in Alberta. Alberta's growth since 2002 wasn't far behind China's, it said, declaring that the province was in the midst of the strongest period of economic growth ever recorded by any province.
Alberta's economic outlook has been rosy for the last few years, thanks to historically high energy prices and feverish oilsands development in the province's north. Analysts say that's likely to continue for the foreseeable future. British Columbia and Newfoundland are also enjoying above-average growth.
But in Central Canada and the rest of Atlantic Canada, the operative word is s-l-o-w. Manufacturers have been hit by a rising Canadian dollar that's made their exports much more expensive in the U.S. market, where consumers are already pulling back as housing prices retreat from bubble territory. For provinces that don't have a significant store of base metals, or oil and gas wealth, staying with the resource-rich pack is next to impossible.
| Annual growth | |
|---|---|
| Canada | 7.4% |
| Nfld. | 3.0% |
| P.E.I. | 3.3% |
| Nova Scotia | 6.4% |
| New Brunswick | 6.2% |
| Quebec | 6.9% |
| Ontario | 5.3% |
| Manitoba | 4.9% |
| Saskatchewan | 4.3% |
| Alberta | 18.1% |
| British Columbia | 5.8% |
Retail sales
Cash registers throughout Canada have been busy in 2006 as consumers keep spending. But in Alberta, the registers have been smoking. Its 18.1 per cent annual rise in retail sales is the largest year-over-year increase for any province since Statistics Canada started keeping track. Sales in Alberta have been rising sharply since 2000, thanks to the oil and gas boom.
Despite their spending spree, Albertans also have the highest rate of personal savings in the country, at 5.1 per cent. Most provinces have a negative savings rate.
| Average price | Annual change | |
|---|---|---|
| Canada | $277,700 | 11.5% |
| Nfld. | $141,200 | 0.0% |
| P.E.I. | $128,300 | 9.4% |
| Nova Scotia | $174,900 | 9.6% |
| New Brunswick | $129,400 | 7.3% |
| Quebec | $194,200 | 5.2% |
| Ontario | $279,600 | 6.3% |
| Manitoba | $150,600 | 12.5% |
| Saskatchewan | $133,300 | 8.6% |
| Alberta | $277,600 | 27.2% |
| British Columbia | $387,700 | 16.7% |
Housing
By almost every measure you can think of, the housing market in Western Canada — especially in Alberta — is on fire. The price increases being recorded in that province are nothing short of breathtaking, with annual increases topping 40 per cent in Calgary and 25 per cent in Edmonton.
British Columbia has been home to some of the country's most expensive real estate for years, even if the annual increases don't quite match Alberta's. Re/Max forecasts that the average home in Vancouver will rise in value by 18 per cent in 2006, to a nation-leading $503,000.
CMHC says price jumps in the two most westerly provinces will result in an 11.5 per cent rise in the cost of the average home in Canada in 2006 — the biggest annual rise since 1989.
Housing starts in Alberta will reach record levels in 2007 because of "unprecedented population inflows," CMHC forecasts. Statistics Canada reported that Alberta building permits in September 2006 were a record $1.3 billion and came close to surpassing Ontario's — something that hasn't happened in a quarter-century.
| Canada | 6.2% |
| Nfld. | 14.2% |
| P.E.I. | 11.1% |
| Nova Scotia | 8.2% |
| New Brunswick | 8.1% |
| Quebec | 7.7% |
| Ontario | 6.4% |
| Manitoba | 4.2% |
| Saskatchewan | 3.9% |
| Alberta | 3.0% |
| British Columbia | 4.6% |
Employment
The western boom has meant a huge surge of new residents and workers. In Alberta, the labour force has grown by 92,000 over the past year — more than any other province. Two out of every five new Canadian jobs in the first 10 months of 2006 were created in that province.
Alberta's participation rate (the percentage of the population that is in the workforce) is the highest in the country, at 73.3 per cent. Its unemployment rate is the lowest. In fact, among adult men, the jobless rate in Alberta is just 1.8 per cent — a 30-year low.
Saskatchewan and British Columbia have also shown strong job growth over the past year. But in Ontario, the jobless rate is above the national average as manufacturing jobs disappear. Further east, the jobless rates move even higher, topping 14 per cent in Newfoundland and Labrador.
The Alberta job boom has its downsides. Employers say it's difficult attracting skilled workers. And the high school dropout rate in rural Alberta is among the highest in Canada, at 25 per cent. Statistics Canada blames "the promise of attractive pay for relatively unskilled work."
| Annual change | |
|---|---|
| Canada | 0.7% |
| Nfld. | 0.2% |
| P.E.I. | -0.2% |
| Nova Scotia | 0.2% |
| New Brunswick | -0.3% |
| Quebec | 0.0% |
| Ontario | 0.9% |
| Manitoba | 0.9% |
| Saskatchewan | 1.3% |
| Alberta | 3.7% |
| British Columbia | 1.0% |
Inflation
The country's annual inflation rate was just 0.7 per cent in September 2006 as gasoline cost much less than it did the year before. The only thing that prevented the overall inflation rate from being negative was the big rise in what Statistics Canada calls homeowners replacement costs. That figure is largely based on the price of new housing, excluding land. By that measure, housing replacement costs rose 8.8 per cent nationally. But in Alberta, it was up 48.6 per cent. That's a big reason Alberta leads the inflation charts.
The average annual wage increase in Alberta is running above seven per cent — far above the national average — as employers respond to labour shortages by boosting pay.
