Recession officially over but Canadian cities still hurting: CIBC World Markets Inc.

Dec 1, 2009

10 of top 25 metropolitan areas in negative territory

TORONTO, Dec. 1 /CNW/ - While yesterday's announcement by Statistics Canada that the 0.4 per cent (annualized) jump in Canadian headline GDP officially ended the recession, a closer look at the numbers shows that Canada's major cities are still hurting from the economic downturn, finds the latest CIBC Metro Monitor report.

The Metro Monitor finds that economic momentum in Canada's top metropolitan centres is at its lowest level since 1991, with 10 of the country's top 25 urban areas showing negative growth. "While the Statistics Canada's report provides us with a sense of the sectoral breakdown of the disappointing performance, it is silent on the regional distribution of the pain," says Benjamin Tal, senior economist and author of CIBC's Metro Monitor.

"On a year-over-year basis, our index continued to trend downward, giving us some early warnings regarding the soft GDP numbers. After all, more than two-thirds of Canadian GDP is generated in Canada's major cities. So the tale of those cities is the tale of the economy."

Ten cities are now in negative territory, double the number in the first quarter of the year. Nine of the ten cities are located in Ontario and Quebec, reflecting the multi-dimensional challenges facing the two provinces due to weakening manufacturing and forestry sectors, decreased demand for imports in the U.S. and the strong Canadian dollar.

For the first time, the city of Halifax took top spot in CIBC's ranking of the economic momentum in Canadian cities. "Halifax was able to move its way into the first spot in our third quarter ranking - a notable improvement from its fifth spot six months ago," adds Mr. Tal. "The nation's leading ranking of Halifax was achieved despite the fact that the city did not lead the nation in any of our macro categories, reflecting its relatively diversified sources of economic growth and reduced vulnerability to economic shocks."

The report notes that both Regina and Saskatoon, which ranked second and third respectively, were able to maintain their high rankings based on rapidly growing populations and a continued expansion of their job markets. Both cities also enjoy very low unemployment rates as well as extremely low rates of both business and consumer bankruptcies.

The still soft mining and drilling activity reported in Statistics Canada's third quarter GDP report is clearly reflected in the loss of momentum in Alberta. "Calgary and Edmonton, which until recently were the stars of our index, (are) losing ground rapidly and currently hardly above water in terms of overall economic momentum," notes Mr. Tal.

He finds that while population growth in Calgary is still impressive, overall employment growth has been disappointing at best, with the number of jobs in the city declining by close to two per cent (year-over-year) during the quarter - one of the worst showings in the nation. In comparison, Halifax, which topped the report, saw overall employment climb by more than three per cent (year-over-year) during the quarter. CIBC's Metro Monitor ranks Edmonton 13th in the nation with Calgary 15th.

While Vancouver is doing a bit better than its Alberta cousins, its overall performance is relatively weak, with the city now ranked 12th in Canada - its worst performance in years. Mr. Tal notes this weak economic momentum activity is happening despite the fact that the city has seen much activity in advance of next February's Olympic Winter Games.

Toronto has also lost significant ground in recent quarters. CIBC's Metro Monitor now ranks the city 7th in the nation - down from a 2nd place ranking in the first quarter of the year. The drop is attributed to poor employment performance, increased bankruptcies and a big drop in new housing starts. Mr. Tal notes that the unemployment rate in the city is now the fourth highest among all Canadian metropolitan areas while employment is falling by 1.3 per cent on a year-over-year basis. Housing starts in the city have fallen by close to 50 per cent (year-over-year) in the third quarter - one of the worst showings in the nation.

The CIBCWM Metropolitan Economic Activity Index

CIBC's Metro Monitor uses nine key macroeconomic variables to develop a metropolitan index of economic activity, which is structured in a way that approximates the change in each city's level of economic activity. With data going back in history, the index not only monitors the current performance of a given city but also tracks its cyclical behaviour against the national economy and other census metropolitan areas (CMAs). The focus is on the 25 largest CMAs in Canada.

The macro variables used to develop the index are: (1) Population growth, (2) Employment growth, (3) Unemployment rate, (4) Full-time share in total employment, (5) Personal bankruptcy rate, (6) Business bankruptcy rate, (7) Housing starts, (8) MLS Housing resales, and (9) Non-Residential building permits. The information is combined into one index per city to produce "The CIBCWM Metropolitan Economic Activity Index".

The complete CIBC World Markets report is available at:
    http://research.cibcwm.com/economic_public/download/metro_monitor.pdf.

CIBC's wholesale banking business provides a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.

CIBC World Markets Inc. is a wholly-owned subsidiary of Canadian Imperial Bank of Commerce (CM: TSX; NYSE) and part of Canadian Imperial Bank of Commerce's wholesale banking arm which also includes other affiliates including: CIBC World Markets Corp., CIBC World Markets plc, CIBC World Markets Securities Ireland Limited, CIBC Australia Ltd, and CIBC World Markets (Japan) Inc.

For further information: Benjamin Tal, Senior Economist, CIBC World Markets Inc. at (416) 956-3698, benjamin.tal@cibc.ca; or Kevin Dove, Communications and Public Affairs at (416) 980-8835, kevin.dove@cibc.ca


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