June 15, 2012
More jobs and stronger investment brighten Quebec’s near-term outlook
Despite the ongoing cloud of uncertainty regarding the potential impact of the European sovereign debt crisis on Canada, mid-way through the year there are signs that the Quebec economy is beginning to pick up some momentum after being in the doldrums through much of 2011.
This observation is based primarily on the fact that since the beginning of the year the province has added almost 70,000 new jobs. This increase in labour demand contrasts sharply with the first four months of 2011 which saw total employment shrink by 7,400.
Year to date in 2012, the pattern of employment growth in Quebec has been similar to the country as a whole with most of the jobs gains occurring in March and April (+60,000). Also, most of the jobs added were full time and in the private sector.
Across major industries, by far the major contributor to the strength in total employment has been the construction sector, which has added just over 30,000 jobs since the beginning of the year due primarily to strength in institutional and commercial building.
Driven in large part by a gradual strengthening in U.S. consumer spending in general and motor vehicle sales in particular, Quebec’s growth of exports of industrial goods rose by 5.3% while foreign sales of machinery and equipment increased by 7.5%, followed by automotive parts and equipment (33.4%).
Due in part to this strength in goods production, manufacturing employment in the province increased by 13,700.
Looking ahead, evidence of expanding of U.S. manufacturing activity reflected by the most recent U.S. Institute of Supply Management Purchasing Mangers’ Index and strong growth of motor vehicle sales on both sides of the border through May should underpin Quebec’s growth of exports through the second half of 2012.
Also, although the pattern of weak employment growth through late 2011 and early 2012 depressed both retail sales and housing demand in the first quarter, both of these components of domestic demand should benefit from the recent rebound in full-time employment growth against a background of persisting low interest rates and moderate growth of disposable incomes.
Finally, although investor confidence suffered recently due to escalating concern about the outlook for Europe, the fundamental drivers of investment in Quebec remain positive.
Specifically, based on the most recent Statistics Canada Survey of Investment Intentions, private and public organizations plan to increase their total non-res investment by 5.6% in 2012, well ahead of the 3.8% increase in investment they planned early in 2011.
Further, the provincial government’s Plan Nord to develop the province’s northern regions should give a solid boost to transportation and energy infrastructure investment during the second half of the year extending into 2013.
As a result of this stronger pattern of domestic and external demand, the Quebec economy should grow by 1.8% to 2.3% in 2012 and by 2.0% to 2.5% in 2013 compared to 1.7% in 2011.