• Real GDP in Prince Edward Island to climb by more than 4 per cent in 2000
• Hectic pace of job creation fuelling impressive growth in real after-tax income per person this year
• Consumers in Prince Edward Island responding to good times in the job market
• Province's manufacturing sector losing some momentum

TORONTO - Canada's provinces will enjoy stellar growth rates of 3 to 6 per cent in 2000, with "new economy" industries leading the expansion from coast to coast, say TD economists in their latest issue of the TD Quarterly Industrial and Provincial Forecast. "Prince Edward Island's economy is expected to record solid growth of more than 4 per cent in 2000, the second-fastest pace of growth in the Atlantic region after Newfoundland," says Derek Burleton, Senior Economist, TD Bank Financial Group. While the outlook for the provincial economy remains bright throughout the 2001-02 period, an expected slowdown in demand from the United States - Prince Edward Island's major export market - will lead to a more moderate rate of economic growth in the province of about 2.7 per cent per year over the next two years.

Individuals in Prince Edward Island enjoying stellar gains in household living standards
Prince Edward Island's job market is expected to turn in one of its best performances in over a decade this year, with employment growth on track to reach an impressive rate of about 5 per cent in 2000, mostly in full-time positions. The red-hot pace of job growth, combined with tax cuts at the federal and provincial levels, will put Prince Edward Island in first place among the provinces in terms of gains in real after-tax income per person - a measure of living standards. "Responding to the good times, consumers in Prince Edward Island have been on a tear this year," says Burleton. "Looking forward to 2001-02, however, gains in living standards and growth in consumer spending will likely cool to a more subdued pace, as the rate of job creation slows."

Growth in Prince Edward Island's manufacturing sector slowing
Following double-digit growth over the past three years, Prince Edward Island's manufacturing sector is expanding at a more sustainable rate this year. However, much of the slowdown has been concentrated in the province's burgeoning transportation-equipment industry. By 2001, an anticipated tapering off of growth in U.S. demand is likely to result in a broader slowdown across Prince Edward Island's manufacturing industries. "The province's construction sector, which is benefiting from work on educational, health-care and social assistance facilities, as well as construction in the retail trade and accommodation and food services industries, is also expected to simmer down next year," notes Burleton.

"New economy" industries leading the way in Canada
An emerging theme in the Canadian economy this year is the growing shift in momentum from traditional sectors toward the "new economy" industries (NEIs). "We define the NEIs as goods and services industries that operate in the domain of telecommunications, fibre optics, and computers and software," notes Burleton. "Although their combined size is still small - at about 7 per cent of GDP and 5 per cent of total employment - these industries have accounted for nearly 25 per cent of economic growth and 15 per cent of overall job creation on average in the provincial economies since 1997." An expected slowdown in corporate profit growth will take some of the steam out of the NEIs over the next two years, but demand for information technology is likely to remain relatively strong, which should ensure that the NEIs maintain their recent share of overall output growth and job creation throughout the forecast period.

Sustained increase in energy prices would produce clear winners and losers
Another focal point of this quarter's forecast is the likely impact on economic growth of the surge in energy prices seen over the last twelve months. Assuming that crude oil prices move back towards the US$25-$28 per barrel range next year, the negative impact on real GDP growth in Canada's provinces should be minimal. "However, if crude oil and natural gas prices remain at or above today's high levels, provinces that are net importers of energy products - including most of the provinces of central and eastern Canada - could see real GDP growth trimmed by as much as half a percentage point next year," warns Burleton.

In contrast, the high level of energy prices is providing a boost to the economic and fiscal positions of Alberta and, to a lesser extent, Saskatchewan. In Alberta, brightening prospects for growth, together with a surge in crude oil and natural gas royalty collections, prompted the government to lift its estimate of the fiscal 2000-01 surplus to a mammoth $5 billion and announce cuts to corporate income-tax rates, which match those promised by the government of Ontario in its May 2000 budget. "This will put increasing pressure on other provinces - which already have some work to do to narrow the gap between their personal income-tax rates and those of Ontario and Alberta - to move corporate tax breaks further up the agenda for the 2001 budget round," says Burleton.

Real GDP: Real gross domestic product in 1992 dollars
Forecast by TD Economics as at October 2000
Source: Statistics Canada, TD Economics

For more information, please contact:

Derek Burleton
Senior Economist, Canadian Industries and Provinces
(416) 982-2514

Don Drummond
Senior Vice President and Chief Economist
(416) 982-2556