Strong resource-based activity in Western Canada will continue to underpin solid consumer and investment spending in 2008, according to Scotia Economics’ latest Provincial Trends report.

“Alberta’s output growth should top the provincial performance ladder at 3.2% in 2008, driven by broad-based business and consumer strength,” says David Hamilton, economist, Bank of Nova Scotia.

British Columbia will remain one of Canada’s economic growth leaders, with real GDP set to expand by 2.8% this year, underpinned by strong construction activity, and robust mining and service sectors. While the forestry sector will continue to consolidate, the run-up to the 2010 Winter Olympics and development of the Pacific Gateway bode well for employment prospects in the province.

In Saskatchewan, surging mining activity and strong domestic demand will help the province grow 3% in 2008. A rising inflow of migration, sizeable employment growth and fiscal stimulus have led to a surge in household income and spending.

“Manitoba should witness solid output growth of 2.5% this year, largely due to robust construction activity and high demand for metals and minerals,” says Hamilton.

According to the report, a combination of factors, heightened foreign competition, a soaring loonie, and more recently, a weakening U.S. economy, are restraining Canada’s overall economic performance, with the manufacturing sector bearing the brunt of the slowdown. National output growth is expected to decelerate from an average of 2.6% in 2007 to 1.9% in 2008.

At the same time, however, non-residential construction and ongoing strength in service industries are providing enough forward momentum across the provinces to offset these headwinds.

“Although most provinces are expected to witness some softening in growth in 2008, there will continue to be significant regional disparities between the Western, Central and Atlantic provinces,” says Hamilton.

Regionally, the West will continue to lead with average growth of 3%, underpinned by the booming energy and mining sectors. Central Canada, mired by weakness in its export-oriented manufacturing sectors, will trail the national average with 1.4% growth in 2008. Similar to the West, average growth of 1.8% in the Atlantic provinces will be supported by the continuing resource boom.