Economic outlook looking rosy for mid-sized Canadian cities

OTTAWA—Things are looking positive a handful of mid-sized Canadian cities, particularly for Medicine Hat and Red Deer, which are expected to return to positive territory this year—in-line with recovering oil prices—after some trying times. Lethbridge, which was not as unfortunate, will continue to enjoy steady economic growth.

This is according to The Conference Board of Canada’s latest Mid-Sized Cities Outlook.

“The economies of Red Deer and Medicine Hat, with their close ties to the oil and gas sector, were hard hit by the commodities price crash. Lethbridge’s broad-based economy, however, bucked the provincial trend and managed to emerge unscathed over the last two years,” said Alan Arcand, associate director, Centre for Municipal Studies, The Conference Board of Canada.

Arcand continued, “This year, these three Alberta mid-sized cities will see many of their key industries benefit from recovering oil prices, the low Canadian dollar and a healthy U.S. economy.”

Medicine Hat is anticipated to post the strongest economic growth among the eight mid-sized cities included in the Conference Board’s report:

Medicine Hat, Alta.

Medicine Hat was hit hard by the oil price collapse, with total output falling in both 2015 and 2016.

The report says that although oil and gas prices are expected to gradually rise over the coming years, they will remain well below their peak levels, a trend which suggests that economic recovery in Medicine Hat and in other energy-oriented cities will be moderate at best.

Real GDP in Medicine Hat is anticipated to expand by 2.7 per cent in 2017 and by 2.0 per cent in 2018.

Rising energy prices are expected to drive output gains of 3.9 per cent in the primary and utilities sector, which includes oil and gas extraction, and also spark turnarounds in the manufacturing and transportation and warehousing industries this year and next.

Employment is poised to rebound this year following two straight annual declines as well.

Red Deer, Alta.

Red Deer’s economy also suffered back-to-back declines in 2015 and 2016 due to the drop in oil and cattle prices.

The Conference Board says the local economy will be on more solid footing this year and next with real GDP poised to rebound by 2.0 per cent in 2017 and 2.2 per cent in 2018.

Red Deer’s construction and manufacturing industries are expected to benefit from the gradual recovery in oil prices. This year, the local construction sector is anticipated to grow by 2.9 per cent, after contracting by an annual average pace of 17.6 per cent over the last two year.

The report anticipates job growth will resume in Red Deer this year, following a record 8.4 per cent drop in 2016.

Lethbridge, Alta.

Driven more by agriculture and food processing than by oil, the report says Lethbridge’s economy will continue to enjoy steady growth this year with an anticipated 2.4 per cent rise in GDP.

Employment is expected to contract 11.6 per cent this year and rise only 1.0 per cent next year, but the number of jobs in the region remains historically high following what the Conference Board suggests was an unsustainable increase in 2015.

Lethbridge’s primary and utilities sector focuses on cattle production, an industry the report says is now confronting a soft market and weak pricing due to rising global supplies of beef and other meat products—expected to limit growth over the next two years. However, output growth in the primary and utilities sector is forecast average 2.3 per cent annually this year and next.

The report anticipates Lethbridge’s construction and manufacturing sectors are set to receive a boost from Cavendish Farms’ new $350 million potato processing plant, which is expected to double the firm’s local production.

Aggregate output in the services sector is forecast to climb 2.2 per cent per year over 2017-18, led by solid gains in wholesale and retail trade and in finance, insurance and real estate.

Brandon, Man.

Brandon’s economy is expected to post average annual growth of 1.9 per cent in 2017-2018, up from a 1.4 per cent gain last year.

Output in the city’s manufacturing sector is expected to advance by 1.7 per cent in 2017, which the report attributes to regulatory changes by the province to stimulate Manitoba’s hog production, along with a major contract win in the steel manufacturing sector.

Strong population growth and healthy gains in employment and personal income are expected to kick-start the residential investment sector, while the non-residential investment sector is expected to be boosted by several large construction projects.

The report anticipates the services-producing industries are set to build on last year’s 2.0 per cent GDP increase with growth of 2.2 per cent in 2017.

An average of 610 new jobs per year is expected over 2017-18.

Prince George, B.C.

After averaging gains of 2.2 per cent annually between 2012 and 2016, Prince George’s economic growth is expected to slow down to 1.5 per cent this year.

A healthy U.S. economy and recovering housing market are expected to increase demand for B.C. wood products, supporting the local primary and utilities sector. However, the report anticipates forest pests, tariffs on softwood lumber entering the U.S. and a struggling mining sector will temper the industry’s growth.

The finance, insurance and real estate industry are expected to continue to benefit from a strong housing market.

Job growth is forecast at 5 per cent in 2017, bouncing back from a major drop in 2015 and a weak gain in 2016.

Timmins, Ont.

The Conference Board says Timmins’ economy remains on a path of stable and moderate growth.

Real GDP increased by 1.3 per cent in 2016 and is forecast to average slightly stronger growth of 1.5 per cent over 2017-18.

Output in both the manufacturing and the primary and utilities sectors are projected to rise at a healthy pace this year, boosted by a low Canadian dollar, recovering gold prices and several positive developments in the mining sector.

Unemployment is expected to fall from 7 per cent in 2017 to 6.2 per cent by 2018—a turnaround projected to support household consumption and help spur a 1.8 per cent increase in wholesale and retail trade output this year.

Sault Ste. Marie, Ont.

Sault Ste. Marie’s real GDP growth is expected to come in at 0.6 per cent in 2017 and 0.9 per cent in 2018, after flat readings the last two years.

The construction sector is on track to return to positive output growth this year, following contractions in five of the past six years.

Things are also looking up for the manufacturing sector, which has struggled since 2012.

Output is forecast to stabilize this year and grow by 0.6 per cent in 2018, and decent performances in wholesale and retail trade, and in finance, insurance and real estate are projected to drive moderate services activity.

Employment is expected to grow by 2.8 per cent this year.

Miramichi, N.B.

Although Miramichi’s economy struggled heavily from 2005 to 2014, the report finds its overall economic outlook is relatively upbeat, as a modest recovery that started in 2015 is expected to continue.

Real GDP is forecast to expand by 0.6 per cent this year and 0.7 per cent in 2018.

A relatively good performance by the services industry, which generates nearly 90 per cent of the area’s total economic activity, kept the economy afloat last year and should continue to do so in 2017 and 2018.

It’s anticipated that an aging population will drive demand for health care services, while modest employment and income gains are projected to provide a lift to wholesale and retail trade.

On the goods side of the economy, the construction sector is also poised to grow, but this is expected to be more than offset by persistent declines in manufacturing and in the primary and utilities sector.