Prairie provinces gain the upper hand

Prairie provinces gain the upper hand


From Friday's Globe and Mail

April 3, 2008 at 9:17 PM EDT

CALGARY - The Alberta economy is slowing and Ontario faces recession, shifting the Canadian economic spotlight to unlikely new stars: Saskatchewan and Manitoba.

On the Prairies, the boom is on, shifting east from Alberta, where the red-hot economy and housing prices of the past few years are forecast to cool, according to Royal Bank of Canada.

Record prices for some commodities - grain and crude oil - and high rates for natural gas, potash and uranium have fuelled booms in Saskatchewan cities and towns, causing some of the country's sharpest runups in real estate prices. In Manitoba, real estate prices are also rising, buoyed by agricultural and major public projects, such as Manitoba's Winnipeg Floodway expansion.

Saskatchewan will lead growth in the country this year at 3.6 per cent, followed by Alberta at 3.3 per cent, with Manitoba in a close third at 2.8 per cent, Craig Wright, chief economist of Royal Bank of Canada, wrote in a report published yesterday. "Saskatchewan and Manitoba have become the new ‘it' provinces," Mr. Wright declared.

Calling Manitoba and Saskatchewan the "it" provinces, Mr. Wright echoed language usually used for Hollywood starlets - not quite the imagery one might conjure up when thinking about the flat prairies and their endless horizons that for so long were considered places to escape from rather than move to.

Now, job seekers are chasing new opportunities there, and prairie ex-pats are returning home. Net immigration from other provinces to Saskatchewan and Manitoba is in the thousands - better than the outflows of recent years, and occurring as the shift of people to Alberta collapses toward zero.

Economic success, which has been percolating in the past year, has sparked a new sense of optimism on the Prairies, especially in Saskatchewan, buoyed by a Grey Cup victory for the home province Roughriders, their first in almost two decades.

People are making more money and spending more as well: Personal disposable income and retail sales are forecast to rise between 8 and 9 per cent in both Saskatchewan and Manitoba this year, the best in Canada, Royal Bank predicted. The provinces' unemployment rates are expected to be among the lowest in Canada, stoking the boom-time problems known all too well in Alberta - a shortage of skilled workers.

While the news is good in the West, the country's economic heart, Ontario, accounts for about 40 per cent of the national economy and it stands "on the brink of recession," Royal Bank said.

Growth in the province is predicted to be just 1.1 per cent in 2008 - half the rate of last year - mostly because of its large exposure to the slumping economy in the United States, the world economic engine that Federal Reserve Board chief Ben Bernanke admitted may well be in recession.

For Canada, the action on the Prairies has only a nominal impact on the country as a whole, with Saskatchewan and Manitoba accounting for just 6 per cent of the national gross domestic product. Even adding Alberta's 14-per-cent share, the three provinces together represent only half the economic activity of Ontario.

Royal Bank sees Canada's economic growth slowing to 1.6 per cent this year - down from an estimated 2.7 per cent in 2007 - before a possible rebound to 2.3 per cent in 2009.

The main problem is that "no provincial economy [is] immune from [the] U.S. malady," the bank said, but added that the blow is softened because all provinces have diversified with more exports moving beyond the U.S. to places such as China, a shift led by British Columbia.

Meanwhile, in Alberta, "after three years of chart-topping growth," the economy is cooling, as pressures of high housing prices and high costs for businesses cool the overheated province to 3.3-per-cent growth. "This is by no means slow growth," Royal Bank noted, adding that the worrisome 5-per-cent inflation rate of 2007 should fall to about half that figure this year.