Buoyed by the falling Canadian dollar, Manitoba’s manufacturing sector will be one of the main drivers of the province’s economy in 2015.
Combined with expected strong performances from the agricultural industry, as well as spending both on infrastructure and by the consumer, Manitoba’s economy is projected to perform at near the national average this year.
Predictions for growth in real gross domestic product (GDP) range from 2.3% (from Bank of Montreal) to as high as 2.9% (from Royal Bank of Canada [RBC]).
“The manufacturing side of Manitoba is really going to benefit from the [lower] dollar and the U.S. economy being stronger,” says John McCallum, economics professor with the I.H. Asper School of Business at the University of Manitoba. “The trouble is manufacturing represents only 70,000 jobs in Manitoba.”
McCallum predicts Manitoba will approach 3% GDP growth this year. A few months ago, he’d have given a slightly higher number because the oil and gas sector had yet to step off a cliff.
He also believes the U.S. economy will grow at 3% in 2015, which will provide a much needed boost to Manitoba, which ships 85% of its exports south of the border. “The U.S. really took its medicine hard after 2008 [following the recession, but] has a pretty nice outlook now,” he says.
Natalia Ward, economist with the Ottawa-based Conference Board of Canada, agrees and believes manufacturing in Manitoba is poised to post healthy gains. “The order book at [bus manufacturer] New Flyer Industries [Inc.]is quite full. The aerospace industry is doing well, too,” she says, noting that she also expects solid growth in utilities, metal mining, construction and transportation.
A significant part of the economic push will come from the provincial government. The province has committed more than $5 billion to infrastructure spending between 2014 to 2018.
However, Premier Greg Selinger is facing a crisis of leadership within his party over low polling numbers and his handling of the province’s sales tax. “[This crisis] has become something of a national story,” says McCallum. “That, combined with being such a high-deficit province, isn’t helping private-sector investment in Manitoba. If you’re an outside investor, the deficit and confused politics leave you staying at the margin. There are other opportunities [for investors]to do things that don’t have these problems.”
Paul Ferley, assistant chief economist with RBC in Toronto, says RBC’s rosy forecast assumes that agriculture won’t be the drag on economic growth that it was last year. “We’re expecting a modest improvement in yields, assuming normal weather and growing conditions,” he says.
But, in a province in which floods of the century have become an almost annual occurrence, those assumptions are far from guaranteed.
The outlook for the energy sector also is mixed. Even though Manitoba’s oil and gas sector has been growing steadily over the past few years, it still represents a single-digit percentage of the province’s overall economy. So, while the free fall in oil prices won’t have nearly the effect in Manitoba as Alberta or Newfoundland are feeling, oil prices have the potential to prevent Manitoba’s economy from hitting its potential, Ferley says.
“All of the negative headlines about investment being cut back in the energy sector could weigh on business confidence,” Ferley says. “That could allow the weakness in energy investment to dominate, feed on itself and have a more pronounced negative hit [on the economy].”
On the positive side, lower oil prices are being reflected at retail gas pumps; Ferley believes those savings will enable consumers to provide a lift to both Manitoba’s and the national economies, either by allowing debt to be paid down or through greater consumption.
Ward believes there are a few black clouds on Manitoba’s horizon. First, fluctuating commodities prices for metals could lead to lower production output if those prices suddenly decline.
Second, Russia’s new ban on hog imports could spell trouble because Russia is Canada’s fourth-largest hog export market – and Manitoba is a major hog producer. “[The ban],” Ward says, “is putting downward pressure on the industry.”
GDP, 2013 ($bil.): 61.3
GDP % change: +3.7
2014-15 deficit ($mil.): 402
Estimated net debT ($bil.): 18.6
Per capita wage growth, % change, 2013-14: +3.9
Household disposable income, per capita: $27,940
Figures from latest available reports/estimates
Sources: conference board of canada; province ie chart
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