BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT
BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT
BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT
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23<br />
The mining and oil and gas sectors are doing<br />
well. Potash production and prices are well<br />
above last year’s levels as a result of strong<br />
global demand. Uranium mining is also<br />
benefiting from firm demand and high prices.<br />
Mineral fuels exploration, development, and<br />
extraction continue to be strong, due to skyhigh<br />
energy prices. Oil production has been<br />
virtually flat recently but gas production has<br />
registered solid gains.<br />
Manufacturing has been another source of<br />
strength, with healthy gains in food processing<br />
and petroleum and coal products.<br />
While running a little below the previous year’s<br />
pace on an annualized basis, retail sales have<br />
recently strengthened and should remain solid<br />
in <strong>2005</strong>. We expect the contribution of<br />
consumer spending to Saskatchewan’s<br />
economic expansion to increase in <strong>2005</strong> as<br />
retail sales growth rises to 4.8%.<br />
Construction activity is likely to weigh on the<br />
province’s economy next year. Housing starts<br />
are poised to hit 3,400 in 2004 and then slip to<br />
3,000 units in <strong>2005</strong> as interest rates rise. On<br />
the non-residential side, a substantial decrease<br />
in the value of building permits issued suggests<br />
softer conditions ahead in that segment of the<br />
market.<br />
Public sector restraint will also be a drag on<br />
growth. In order to keep the deficit under<br />
control, the government increased the<br />
provincial sales tax by one percentage point in<br />
its spring budget, cut 500 civil service positions,<br />
and held program spending to a 0.9% increase<br />
in 2004-05. Despite these measures, the<br />
deficit is still expected to rise from $147 million<br />
in 2003-04 to $287 million in 2004-05. In <strong>2005</strong>-<br />
06, program spending is slated to rise only<br />
1.1%.<br />
All told, healthy conditions for agriculture,<br />
mining, oil and gas, and manufacturing should<br />
lift economic growth in Saskatchewan to 3.0%<br />
in 2004. An assumed return to average crop<br />
yields and a weakening of oil, gas and potash<br />
prices is expected to moderate growth to 2.5%<br />
in <strong>2005</strong>.<br />
Alberta<br />
With oil prices rising above US$50 a barrel, it’s<br />
a great time to live in Alberta. Alberta should<br />
lead the country in economic expansion this<br />
year and next, with growth of 4.0% in each<br />
year.<br />
Almost all economic indicators are pointing<br />
upward. Employment has continued to rise at<br />
a brisk pace, with strong gains in construction,<br />
mineral mining, and oil and gas extraction.<br />
Exports, manufacturing shipments, and retail<br />
sales have all been rising by more than 10%.<br />
And, wage gains have been amongst the<br />
strongest in the country. Only the housing<br />
market is looking at declines this year. After<br />
topping 36,000 units in 2003, housing starts are<br />
projected to decline to just under 34,000 in<br />
2004.<br />
Even the agricultural sector is showing<br />
strength, despite the ban on live cattle exports<br />
to the United States. Farm cash receipts are<br />
up by more than 8%, with gains for grains,<br />
oilseeds, hogs and poultry more than offsetting<br />
losses by cattle operations.<br />
In <strong>2005</strong>, high energy prices, though off their<br />
2004 peaks, should sustain construction and oil<br />
and gas sector activity. The Alberta<br />
government’s inventory of major projects<br />
currently under construction, proposed, or<br />
recently completed lists 1,047 projects with a<br />
value totaling $94 billion in September (up 16%<br />
from a year earlier). Two-thirds of these<br />
projects, by value, are in the oil and gas sector.<br />
Manufacturing should also continue to do well,<br />
with healthy gains by food processors, metal<br />
fabricators, and manufacturers of wood<br />
products, computers and electronics, and<br />
machinery and equipment.