Economic momentum of Canadian cities slows dramatically: CIBC World Markets
Dec 17, 2008
TORONTO, Dec. 17 /CNW/ - CIBC (CM: TSX; NYSE) - The economic momentum of Canada's cities has been softening for more than two years, and the slowdown is intensifying, notes a new report from CIBC World Markets. Almost half of the decline in the CIBC World Markets Metropolitan Economic Activity Index witnessed since 2006 has occurred this year, according to Benjamin Tal, Senior Economist at CIBC World Markets in his latest Metro Monitor Report. In fact, "the pace at which the index has been softening has accelerated dramatically in the last six months," he says. The index of 24 cities measures nine economic variables. Six variables are less favourable than a year ago, notes Mr. Tal, who points to slower employment growth, rising unemployment and personal bankruptcies, slightly lower full-time employment as a share of total employment, negative growth in home sales, and fewer housing starts. The three positive indicators for the index are lower business bankruptcies, higher non-residential building permits and stable population growth. While these factors provide an aggregate view of the pace of economic growth for Canadian cities, data for each city reveal other notable changes from last year. For the first time, Regina tops the economic activity rankings with an index of 23, an increase of 10.5 points moving it up from tenth spot last year. "Strong population growth (second only to Saskatoon), a nation-leading pace of job creation, low unemployment rate and well below average corporate and personal insolvency rates combined to boost Regina to its current ranking." However impressive Regina's economic pace is, its index score illustrates just how much the momentum has slowed since last year. An index of 23 would have only been good enough for fourth spot in 2007, and it's well below last year's leading index score of 30.1, owned then by Edmonton. Meantime, Toronto's economic momentum improved slightly from last year with an index of 20, moving it to second spot from fifth in the rankings. Mr. Tal says Toronto's consistently strong performance reflects the growing diversity of the city, and adds that "(Toronto's) population is growing fast (ranked fourth in population growth), while the quality of employment is strong. As well the pace of growth in consumer and business bankruptcies is well below the national average." However, he cautions that the Toronto labour market is softening with the unemployment rate well over seven per cent and employment gains well below the national average. Despite dropping almost four index points from last year, Saskatoon remains in third spot with an index of 20. Mr. Tal says Saskatoon's position reflects "strong population and employment growth, a low unemployment rate as well as a relatively low rate of consumer bankruptcies and continued improvement in the quality of employment." Edmonton and Calgary, last year's first and second ranked cities, saw their index scores fall by 14.6 and 10.6 points respectively, a result that's consistent with lost economic momentum generally seen in western Canada, says Mr. Tal. "A notable softening in labour market activity, population growth and housing market activity clearly played a significant role in the worsening position of these cities." Yet despite the headwinds in the west, the absolute level of activity in Edmonton, Calgary and Vancouver remain well above average, notes Mr. Tal. Vancouver actually moved up to fourth spot with an index of 16.8. Edmonton ranks fifth with an index of 15.5 and Calgary is sixth with an index score of 13.9. After seeing renewed momentum in 2007, Montreal experienced one of the biggest year-over-year declines in the index, falling 13.4 points to 9.4. It also dropped to thirteenth in the rankings from fourth. Montreal's slowing momentum, forecast last year by Mr. Tal, is due in part "to a softening labour market, rising bankruptcies and a notable softening in housing market activity." Meanwhile, reflecting the difficulties in the manufacturing sector, "cities such as Windsor, London and Saguenay still face major challenges," says Mr. Tal. "The weakening U.S. economy is clearly adding another layer of difficulties facing those cities."See chart "CIBCWM Metropolitan Economic Activity Index (2008Q3)": http://files.newswire.ca/256/Cover_chart_2008Q3.pdf The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/metro_monitor.pdfCIBC World Markets is the corporate and investment banking arm of CIBC. To deliver on its mandate as a premier client-focused and Canadian-based investment bank, World Markets provides a wide range of credit, capital markets, investment banking, merchant banking and research products and services to government, institutional, corporate and retail clients in Canada and in key markets around the world.
For further information:
For further information: Benjamin Tal, Senior Economist, CIBC World Markets at (416) 956-3698, Benjamin.firstname.lastname@example.org; or Tom Wallis, Communications and Public Affairs at (416) 980-4048, email@example.com