Maintenance shutdown at Terra Nova to cause drop in oil production, says BMO
Provincial GDP growth rates are shown for 2011 in each province, with predicted GDP growth rates for 2012 and 2013. — Source: BMO Economics
Newfoundland and Labrador’s economy is expected to see weaker growth in 2012, according to a Provincial Monitor report released today by Bank of Montreal (BMO) Economics. But some otherwise positive trends are predicted.
BMO says real GDP growth is expected to slow to just 1.0 per cent this year, largely due to a maintenance-related drop in oil production, but growth should rebound 3.3 per cent in 2013.
“Construction and capital investment activity have been key economic drivers in the province in recent years, and growth has continued at a strong clip in 2012,” said Robert Kavcic, BMO capital markets economist.
“Total capital expenditures are expected to jump 27 per cent this year, a similar pace to that seen in the prior two years, with the private sector — mainly in resource industries — doing most of the lifting," Kavcic said. "Major private-sector projects are ongoing in the iron ore sector, development of the Hebron platform continues, and development of Muskrat Falls is in the pipeline.”
Kavcic said offshore oil production is forecast to fall this year given a maintenance shutdown at Terra Nova, with output down 10.5 per cent year-over-year during the first half of 2012. “While output should bounce back next year, the longer-term trend remains downward given that overall output has peaked until Hebron is on stream later in the decade.”
Jim Fallon, district vice-president with BMO in Newfoundland and Labrador, said despite the maintenance-related declines in oil production, "we are seeing solid business growth in construction and capital investments.”
In communities across the province," Fallon said, "entrepreneurs are also showing a solid level of optimism and small businesses continue to be a strong source of strength.”
Kavcic said other underlying economic trends in the province are solid. “Employment was up 3.8 per cent year-over-year in September, and construction jobs remain elevated despite some falloff in recent months,” said Kavcic. “The jobless rate was down 1.3 percentage points in the past year to 12.3 per cent, but still up from the record low of 11.3 per cent in April 2011. Meanwhile, average weekly earnings are up a heated 6.9 per cent year-over-year. The sturdy labour market performance has helped support retail sales trends, but outward migration flows have picked up in recent quarters, a trend that could weigh on domestic housing and retailers if it persists.”
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.