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
    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
    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
    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)":

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For further information:

For further information: Benjamin Tal, Senior Economist, CIBC World
Markets at (416) 956-3698,; or Tom Wallis, Communications
and Public Affairs at (416) 980-4048,