Most Cities in Central Canada to see growth moderate
Ottawa, November 20, 2018—Although its economic growth has been easing in 2018, Montréal will still come out on top as the metropolitan growth leader in Canada this year, with real GDP expected rise by 2.9 per cent, according to The Conference Board of Canada’s Metropolitan Outlook: Autumn 2018. Hamilton and Québec City are also expected to be among the top performers this year, ranking third and fourth nationwide.
"For the first time since records began in 1987, Montréal will boast the fastest growing metropolitan economy this year among the 13 cities covered in this edition of our report,” said Alan Arcand, Associate Director, Centre for Municipal Studies. “The local economy is enjoying widespread gains this year, accompanied by continued robust job creation and solid income growth. But like most other cities in Canada, economic growth is set to moderate in Montréal in 2019.”
- Montréal joins Winnipeg and Hamilton as the fastest growing metropolitan economies in the country this year. However, next year all three census metropolitan areas (CMAs) will see economic growth moderate to around 2.0 per cent or less.
- Toronto’s economy has had a strong run over the past few years, but slower economic growth of 2.3 per cent this year and 2.4 per cent in 2019 is forecast.
- Ottawa-Gatineau’s economy is also set to moderate but remain healthy over the next two years.
Montréal and Québec City
Montréal’s economy remains robust and is on track to expand by 2.9 per cent this year. The positive momentum in Montréal is being supported by strong non-residential investment, solid job creation, and healthy population growth. The area’s labour market is tightening, which is fostering wage gains and, in turn, keeping consumers in a spending mood. This has resulted in high levels of new home construction and solid growth in retail sales. Other industries set to perform well this year include manufacturing, arts and entertainment services, and accommodation and food services. Beyond this year, the aging of the population, along with the combination of higher interest rates and heavier debt loads, will put a lid on consumer spending in Montréal. This will result in more tepid, yet still solid, real GDP gains of 1.8 per cent in 2019.
Following growth of 2.7 per cent in 2017, Québec City’s economy is on pace to grow by 2.6 per cent this year. This year’s growth has been driven by an especially strong performance from the goods sector. In particular, the manufacturing and construction industries are on track to add more than 5,000 new jobs to the economy. The services-producing industries will trail behind but still expand at a solid pace. However, interest rate hikes and an aging population will act as drags on growth over the next few years, and a moderate gain of 1.9 per cent is in the cards for the area next year.
Hamilton, Toronto, Ottawa-Gatineau
Although economic growth in Hamilton is moderating, the CMA will still be a growth leader among major Canadian cities this year, ranking behind only Montréal and Winnipeg. Hamilton’s all-important steel industry continues to face uncertainty, but high steel prices are mitigating some of the impact from tariffs imposed by the United States. The manufacturing sector should wrap up the year with a solid expansion before moderating in 2019. Growth is also set to slow this year and next in the city’s services sector, as rising interest rates and the federal mortgage stress test will limit growth in the area’s housing market and thus in its finance, insurance, and real estate sector. In all, Hamilton’s economy is forecast to moderate from 3.6 per cent in 2017 to 2.6 per cent this year and to 1.9 per cent in 2019.
Following a 3.4 per cent gain last year, real GDP growth in Toronto is set to slow to 2.3 per cent this year, before remaining relatively steady at 2.4 per cent in 2019. Consumers are feeling the pinch of rising interest rates and high household debt, which will limit growth in retail trade this year and next. These factors plus government cooling measures will also put a lid on near-term growth in the area’s housing market. Meanwhile, the manufacturing sector will remain mired in modest growth, as it fails to fully take advantage of a low Canadian dollar and healthy U.S. economy. Despite the moderate outlook, the local economy is on track to generate a total of nearly 100,000 new jobs over 2018-19.
Ottawa-Gatineau’s economy is expected to expand by 2.0 per cent this year and by 1.8 per cent in 2019. Given that public administration is such a significant contributor to the National Capital Region’s economy, it should come as no surprise that output in this sector is also poised to slow over this year and next, in line with federal government spending plans. Domestic demand is also set to moderate, as the slowing economy and rising interest rates hurt both consumer spending and residential investment. On a more positive note, non-residential construction and the high-tech sector will both remain on a steady growth path.