EconoFACTS

November 07, 2024 | 09:51

Cdn. Provincial GDP (2023) — Onward and Upward

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Provincial GDP figures have landed with a few notable themes evident now that we have complete and revised expenditure accounts through 2023. Here are a few key takeaways:

Upward revisions: Provincial growth was revised back to 2021. While this is standard practice, what stands out here is the size and almost uniform upward nature of the revisions. That also suggests upside growth revisions to the national GDP figures. For example, the growth path for Canada is now 6.0% in 2021 (versus 5.3% previously), 4.2% in 2022 (3.8%) and 1.5% in 2023 (1.2%). On an annualized basis, that works out to almost 0.5 ppts per year in upward revisions over that three-year period. Alberta saw the largest upward revision over that period, while all others except Newfoundland & Labrador were revised higher.

Relative rankings in check: While growth has been reported almost uniformly stronger, the relative ranking among provinces has remained largely consistent with our view. In 2023, for example, British Columbia (2.4%), Alberta (2.3%) and Saskatchewan (2.3%) led the pack, while Quebec (0.6%) lagged. Ontario was a middle-of-the-road performer at 1.4%. None of this differs from our view of the provincial growth landscape.

Small growth disparity: Excluding Newfoundland & Labrador (which tends to see GDP growth swing violently due to various temporary production shutdowns) the gap between the strongest provincial growth rate and the weakest, at 1.7 ppts, was the lowest in at least 30 years in 2023. The average growth gap going back to 1994 has been 5 ppts. The dispersion in unemployment rates has also never been tighter. Unlike past environments where resource booms/busts have driven major wedges in growth performance across Canada, this environment is very uniform. All provinces have been dealing with similar issues to some extent—inflation, interest rates and very strong population growth.

Per-capita growth goes cold: One takeaway for the group is that, while each provincial GDP pie is getting bigger, the slices (i.e., per-capita output) in many cases are getting smaller. Per-capita output has contracted across 5 of 10 provinces over the past five years, a stark change from the prior two periods. Note that each period involved a major shock, be it the financial crisis (2008-13) or the oil boom/bust (2013-18). Upwardly-revised growth rates have made the per-capita performance look less bad, but it still looks generally bad.

Looking ahead: We continue to see a narrow gap in growth across the country this year and through 2025. Alberta is expected to remain relatively strong in both years, with Quebec lagging. While individual performance will vary somewhat based on local factors (e.g., oil production, crop conditions, maintenance shutdowns), we see at least two major macro factors shaping the landscape over the next 18 months. First, the Bank of Canada easing cycle will come to the aid of those provinces that have been struggling most with weak housing markets and the drag on consumption (think Ontario and British Columbia). At the same time, announced curbs to population growth will be felt across the country, but arguably more significantly in Ontario and British Columbia, where the increase in temporary residents has been proportionately more significant.

Table 1 - Canada — Provincial GDP

(y/y % chng)

Source: BMO Economics, Haver Analytics