Provincial economies are headed for at least two more years of healthy expansion and low unemployment rates, say TD Bank Financial Group economists. “Among the provinces, only Newfoundland and Labrador and Prince Edward Island are expected to see growth rates slow measurably over the 2003-04 period compared to this year,” says Derek Burleton, senior economist at TD.

The report looked particularly at provincial household debt burdens. “Regardless of where one points to on the map, consumers have been taking advantage of low interest rates and generous incentives to acquire ‘big ticket’ homes, furniture, and motor vehicles,” said Burleton. “In the process, consumer debt-loads have been mounting. Consumers in B.C. and Ontario shoulder the highest debt as a share of personal disposable income, although this largely reflects residential mortgage burdens linked to the high cost of real estate,” said Burleton.

But Burleton also argues that lofty debt burdens do not pose a serious threat to the consumer spending profile, so long as income growth remains healthy, and interest rates do not rise excessively. Based on these criteria, there is good reason for optimism. Real PDI gains in each of the provinces are expected to remain brisk – at 2.5%-5.0% per year – in 2003-04. On the interest rate front, TD Economics predicts that short-term rates will climb by 225 basis points in 2003-04.

Burleton predicts that retailers can look forward to registering advances in sales over the next one to two years. “Consumers in most parts of the country appear poised to spend liberally this holiday season, starting off 2003 on a high note,” said Burleton.

While he predicts some slowdown in the pace of retail spending from the six-per-cent rate recorded over the past three-year period – in tandem with a moderation in demand for “big ticket” items – he feels confident that the still brisk rate of 4.8% per year can be achieved in the 2003-04 period. At an impressive 7.4% per year, Alberta is expected to record the strongest gain in retail spending over the next
two-year period, supported by booming income and population growth.

With some consumer pent-up demand still waiting to be tapped, retailers in New Brunswick and Prince Edward Island should finish in second and third place, respectively, with gains of roughly 6% per year. TD Economics is least upbeat about prospects for retailers in Saskatchewan and B.C., where recent
robust spending has not been supported by underlying income growth, however gains of 3% to 4% per year are still projected.