BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT

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fees and fines. Despite rising taxes, the fiscal
stance is considered roughly neutral as the
additional revenues funded a hefty 5.4%
increase in program spending. We expect the
fiscal stance in 2005-06 to remain neutral.
Going forward, Nova Scotia’s economy will
benefit from solid growth in North America,
which should boost demand for its goods and
services. It will also be stimulated by a number
of specific projects, including the ongoing
cleanup of Halifax harbour and the Sydney tar
ponds. Tier II of the Sable Offshore Energy
Project should come on stream in late 2004,
boosting natural gas production. Possible
development of the Deep Panuke offshore
natural gas project (the current status appears
to be in limbo) and a possible liquid natural gas
terminal on Cape Breton Island would further
boost economic activity.
New Brunswick
After encountering a number of economic
challenges in 2003, the New Brunswick
economy has had a relatively smoother ride in
2004.
Economic indicators in 2004 point to somewhat
stronger growth of 3.0% this year, up from
2.6% in 2003. After a decline last year,
vigorous export growth has resumed. Job
creation has picked up smartly. The province’s
manufacturers have more than tripled their
pace of growth (as measured by shipments)
through midyear. Though residential
construction activity has moderated from last
year’s peak, it remained relatively robust, with
3,500 new housing units projected in 2004, still
above the past ten-year average.
New Brunswick’s economic performance in
2005 should match that in 2004, with a repeat
expansion rate of 3.0%. We expect
employment growth to continue at a healthy
pace, allowing a slight drop in the
unemployment rate. Employment gains should
give a boost to consumer spending – which has
been quite weak through most of 2004 –
starting later in the year and continuing into
2005. Capital spending is expected to remain
strong, due to the ongoing twinning of the
TransCanada highway and the beginning of
construction of a $750 million liquid natural gas
terminal, which received regulatory approval in
August and is expected to go into operation in
2007. However, on the residential side,
housing starts are projected to moderate
further in 2005, as interest rates rise.
The generally upbeat assessment in the near
term is somewhat tempered by fiscal restrain,
and the unexpected closure of two of the
province’s paper mills in September. The
province’s 2004 budget called for about 750
civil service positions to be eliminated and
program spending to rise only 0.8%. Taxes on
small businesses were reduced, but the
government’s revenue loss was more than
offset by increases in various government
service fees and fines.
The good news is that fiscal restraint should
return the province to a surplus position in the
fiscal year ending in March 2005, which
suggests that there will be less need for
additional restraint in 2005-06.
Québec
Québec’s economy gained momentum in 2004,
after it grew a mere 1.6% in 2003, when
exports dragged down an otherwise positive
performance.
In 2004, while the domestic economy slowed
slightly, the external sector has provided much
stimulus. Any doubts about the export revival
were allayed by an annualized 18% jump in
real exports in the second quarter.
Consumption remains a source of strength,
notwithstanding some slowing midyear.
Consumption should benefit later this year and
next from an improving labour market and the
$1-billion tax cut that comes into effect in 2005.
Employment growth was weak in the first half
of 2004, with what growth there was