The Oil and Gas Services sector will be the economic growth leader over the next two years, while a traditional engine of the economy, the auto sector, will trail the pack, says a new study released by BMO Financial Group.

The Sectoral Outlook Report forecasts the growth rates of 46 industry sectors for the period 2003 to 2007 and outlines the reasons why some sectors are expected to expand by over 11% over the next few years while others will likely tumble.

“While we believe that the economy will continue to move in a positive growth curve through 2003 and 2004, many of the traditional high-performing sectors such as auto parts and vehicle manufacturing will start to falter,” said Tim O’Neill, executive vice president and chief economist, BMO Financial Group. “We anticipate that auto sales in North America will fall approximately 6% this year and will not return to trend levels until mid decade.”

The report, while generally positive about future trends, also warns of the downside risks for some sectors emanating from a near-term military intervention in Iraq. “Military intervention with the United States playing a lead role would raise fears of terrorist retaliation and other security risks, undermining confidence of both businesses and consumers in Canada’s biggest foreign market,” said O’Neill. “Air travel, civilian aerospace manufacturers and, more broadly, tourism would be the most vulnerable industrial sectors to such a development.”

The near-term outlook for energy sector output growth is expected to vary greatly depending on the industry’s sub-sector. The growth rate of Oil and Gas Services will be in sharp contrast to that of Oil and Gas Extraction operations, which should witness a more modest rise of 1.8% over the next two years.


The Professional and Technical Services Sector, which includes legal, accounting, engineering, management consulting and computer and software networking, is also poised for major growth.

The report projects that the construction industry, which has grown at an annualized pace of close to 4.3% over the past four years, will slow to a growth rate of 3.1% over the next two years.

Another sector that is expected to experience only moderate growth in output is retail services. BMO economists expect that real output in this sector will slow to 3.2% this year from a robust 4.9% in 2002.

The full BMO Financial Group Economic Sectoral Outlook report may be found on at www.bmo.com/economic.