Posted on May - 10 - 2010
Newfoundland and Labrador: last in 2009, first in 2010
Although Newfoundland and Labrador had the dubious distinction of seeing its economy contract by -10.2% in 2009, which was significantly faster than any other province in the country, consumers on the Rock fared better than most.
This apparent inconsistency stems from the fact that shrinkage in the province’s gross domestic product was largely caused by a precipitous drop in less labour-intensive resource production and a sharp drop in commodity exports.
During the year, energy exports fell by 49% while exports of industrial materials were down by 51%.
Despite the sharp contraction in external demand, domestic demand in Newfoundland and Labrador continued to expand in 2009 due to sustained growth of consumer spending and residential construction, plus a significant increase in government spending on infrastructure.
Entering 2010, there is clear evidence of sustained growth of domestic demand, driven by record low interest rates, strengthening consumer confidence and a moderate strengthening of employment.
Consumer spending, reflected by year-to-date growth of retail sales, is up by 8.3%, while housing starts year to date in March are up by +76% and existing home sales are up by 25.3% on the same basis.
Given the strong results of the latest Statistics Canada Survey of Investment Intentions, overall growth in Newfoundland and Labrador should benefit from a dramatic upswing in spending on private and government investment projects.
These include the just-started Voisey’s Bay nickel processing facility as well as exploration of the Hibernia South oil field, plus the province’s comprehensive infrastructure stimulus plan.
This surge in investment, plus a significant increase in resource output (from projects such as the White Rose Expansion, which is scheduled to come online in the second half of the year) should give a significant boost to domestic demand during the year.
As a result, growth of the Newfoundland and Labrador GDP should accelerate from last place among the 10 provinces in 2009 to first place in 2010.
Gross domestic product (GDP) growth –
Newfoundland and Labrador vs total Canada
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