Le Lézard
Classified in: Champlain Bridge, Business
Subjects: SVY, ECO

Montreal and Quebec City on track to grow by 1.9 per cent in 2017

OTTAWA, May 25, 2017 /CNW/ - The Montréal and Québec City economies saw modest improvement last year, and the positive momentum is expected to continue in 2017 with real GDP growth projected to strengthen to 1.9 per cent in both cities, according to The Conference Board of Canada's Metropolitan Outlook: Spring 2017.

"Québec's two largest metropolitan economies continue to pick up speed and are expected to post stronger growth this year," said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. "Montréal's economic improvement is being driven by massive infrastructure investments and an accelerating manufacturing sector, while widespread gains across Québec City's services sector, including in real estate and tourism, is supporting stronger growth in the provincial capital."


Following a respectable 1.5 per cent gain in 2016, Montréal's economy is forecast to advance by 1.9 per cent this year, the strongest growth in six years. The improvement will be fuelled by a turnaround in the goods-producing sector, which is expected to post growth for the first time since 2012. Manufacturing activity is expected to accelerate following two years of soft growth. Meanwhile, the construction sector is projected to finally rebound after declining for four consecutive years, thanks to work on the Champlain Bridge and Turcot Interchange, the Bonaventure and Ville-Marie Expressways, the city's three-year $6.4 billion infrastructure plan and $6 billion light-rail project. On a less positive note, residential construction activity remains tepid, as high inventories of multi-family units continue to scare off builders. Overall, construction output growth is projected to reach 2.1 per cent this year.

The tourism sector will be another growth driver, as people flock to the city to participate in events for Montréal's 375th anniversary. However, the strength in tourism, as well as in business services and finance, insurance and real estate, will be somewhat offset by modest growth in the public sector (health care, education and public administration). Overall, output growth in the services-producing industries is forecast to reach a solid 2 per cent this year.

Despite the stronger economic outlook, the metro area's job market is expected to cool somewhat with average gains of 0.9 per cent per year over 2017-18, down from 2016's 1.6 per cent advance. Still, the labour force is expected to climb more slowly, helping to push the unemployment rate down from 7.6 per cent in 2016 to 7.1 per cent in 2018.

This forecast was completed before the spring flooding, so its impact is not factored in this report. It is important to note that damage caused by natural disasters is not captured in GDP, except in the form of lost production or purchases that were disrupted. However, rebuilding does get incorporated in GDP. So, the flooding is likely to generate additional economic activity as public services clean up affected areas and households repair their homes and restock lost furniture, vehicles, and other items.

Québec City
Québec City's economy is also forecast to expand by 1.9 per cent this year, an improvement over a 1.6 per cent increase in 2016. The services sector, responsible for over 80 per cent of Québec City's total economic activity, is expected to enjoy widespread growth this year. For instance, the finance, insurance and real estate industry is poised to bounce back after three years of lacklustre growth, thanks in part to strong commercial and industrial real estate activity in Québec City and Lévis. In addition, tourism activity is expected to remain healthy, thanks partly to the weaker Canadian dollar. Although output growth is projected to slow sharply from 6.9 per cent last year to 2.8 per cent this year, wholesale and resale trade will remain a growth leader.

On the goods side of the economy, a recovery is expected to start in construction, sparked by the ground-breaking of Le Phare de Québec, the tallest building in the province's history. However, the project was originally scheduled to begin in 2016 but was pushed back to this year. Therefore, the possibility of further delays to construction of this significant project represents a downside risk to this forecast. The outlook for residential construction is not as positive, as relatively high inventories continue to convince homebuilders to pull back on new housing projects. Indeed, housing starts fell from 5,440 units in 2015 to 4,770 units in 2016, and further declines are in the cards for this year and next.

Employment is expected to surge by 2.5 per cent in 2017, rebounding from a 0.9 per cent contraction last year, the largest decline since 1999. Job growth is then projected to come in at a more muted 0.8 per cent next year.

Of note, Toronto is expected to boast the fastest-growing metropolitan economy this year among the 13 census metropolitan areas covered in this edition of the Metropolitan Outlook.

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SOURCE Conference Board of Canada

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