Province of Manitoba Economic Update Manitoba Finance: July 2018 1
Topics for Today Overview of the Manitoba Economy Recent Economic Performance Economic Indicators Population Labour Market Manufacturing Sales Exports Housing Investment in Buildings Economic Outlook 2
Overview: Manitoba Economy Manitoba is centrally located in North America and has an extensive manufacturing, wholesale trade, transportation, and warehousing network that produces and distributes raw materials, manufactured goods and services across Canada and globally. Diversified industrial base, with a majority of medium-sized industries. Economic output and jobs are not concentrated in one particular sector or area. As a result, long-term progress is balanced by growth across different sectors. Almost half of the provincial exports are destined for foreign markets while the other half are destined for Canadian provincial markets. This distribution is the most balanced among provinces. Diversity in markets and in production lowers Manitoba s external trade exposure for locally produced goods and services as well as jobs. 3
Manitoba Economy: Consistent Growth Manitoba generates relatively stable annual economic growth over time, even during periods of increased volatility in financial and commodity markets. Over the long-term, the province maintained consistent average annual growth in most key economic indicators. Manitoba s 10-year average annual real GDP growth has been relatively stable over the last 15 years, while the national average has declined. 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 10-Year Average Annual Growth in Real GDP: Manitoba and Canada, 2002-2016 (Compounded Average Annual Per Cent) 3.5 2.4 2002 2004 2006 2008 2010 2012 2014 2016 Source: Statistics Canada Manitoba Canada 2.2 1.6 4
Strength in Industrial Diversity GDP By Industry Shares, 2017 Public Administration 7.6% Accommodation, Food, Arts and Entertainment and Other Services 4.5% Education Services 5.4% Health and Social Services 7.9% Agriculture, Forestry and Fishing 3.8% Utilities 3.0% Mining, Oil and Gas 4.7% Construction 8.1% Manufacturing 9.6% Professional and Scientific 3.1% Goods-Producing Information, Culture, Administration and Management of Companies 4.8% Real Estate, Rental and Leasing 3.7% Note: Excludes imputed rent Finance and Insurance 5.7% Retail 5.7% Transportation and Warehousing 6.7% Wholesale 6.3% Commercial Services Non-Commercial Services Sources: Statistics Canada and Manitoba Finance 5
Recent Economic Performance Momentum built following the oil/commodity price shock. Most key economic indicators showed improvement in growth in 2017. Factors contributing to growth: Strengthening international and interprovincial exports. Strong population growth. Record capital spending on commercial, industrial, and residential properties. Strong employment gains. Bumper crop. Canada Summer Games. Source: Manitoba Bureau of Statistics 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Manitoba Annual Real GDP Growth, 2011 2017 (Per Cent) 2.5 2.9 2.8 2.0 1.2 1.7 2.5 2011 2012 2013 2014 2015 2016 2017 6
Industry Based Growth in 2017 Agriculture, Forestry and Fishing Construction 7.9 8.6 Wholesale Transportation and Warehousing Retail 4.2 4.9 5.3 Real Estate, Rental and Leasing Health and Social Services Professional and Scientific Accommodation, Food, Arts and Entertain. and Other Services 2.7 2.3 2.1 1.9 Manufacturing Public Administration Education Services Finance and Insurance Utilities 1.8 1.5 1.3 0.7 0.4 Real GDP Growth in 2017 Information, Culture, Admin. and Management of Companies -0.2 Mining, Oil and Gas -2.2 Source: Statistics Canada 7
Population Boom Highest population growth in Canada over last three years. Population growth averaging 1.2% annually over past decade. Factors contributing to growth: Successful Provincial Nominee Program. Stable labour market. Affordable living costs. Baby Boom (echo cohort). 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Population Growth, 2000 2017 (Per Cent) Ten Year Average Growth 1.2% 2000 2004 2008 2012 2016 Source: Statistics Canada 8
Components of Population Growth Total Net Migration, 2000 2017 (Persons) Net Natural Increase, 2000 2017 (Persons) 16,000 14,000 12,000 Ten Year Average 10,600 16,000 14,000 12,000 10,000 8,000 10,000 8,000 Ten Year Average 6,200 6,000 6,000 4,000 4,000 2,000 2,000 0 0-2,000 2000 2004 2008 2012 2016-2,000 2000 2004 2008 2012 2016 Source: Statistics Canada 9
Labour Market Manitoba s labour market is the most stable in Canada. Labour supply (labour force) and demand (jobs) growing at a steady 1.0% annual pace since 1976. Labour market is absorbing a record increase in workers, while maintaining a relatively low unemployment rate and a high labour force participation rate. Working age labour force population surpassed 1,000,000 workers in 2017. Strong employment gains in 2017. Total employment up 10,500. Private sector jobs up 11,800. Full-time jobs up 9,200. Part-time jobs up 1,300. Source: Statistics Canada Employment Level, Jan 2015 Jun 2018 (12-Month Moving Average in Number of Workers) 650,000 645,000 640,000 635,000 630,000 625,000 620,000 1.5% -0.4% 1.7% 10
Employment by Industry Change in 2017 Finance, Insurance and Real Estate 3,100 Retail and Wholesale Trade 1,600 Business, Building and Other Support Services Construction Transportation and Warehousing Educational services Accommodation and Food Services Professional, Scientific and Technical Services 1,200 1,200 1,100 1,000 900 700 Information, Culture and Recreation Health Care and Social Assistance Mining, Fishing and Forestry Manufacturing Public Administration 600 500 500 300 200 Employment Change in 2017, (000`s) Agriculture -300 Other Services Utilities -900-1,000 Source: Statistics Canada 11
Employment by Industry Change in 2018 Other Services Agriculture Health Care and Social Assistance Accommodation and Food Services Educational services 3,300 3,000 2,600 2,300 1,900 Business, Building and Other Support Services Transportation and Warehousing 700 1,000 Professional, Scientific and Technical Services 200 Information, Culture and Recreation Public Administration Finance, Insurance and Real Estate Mining, Fishing and Forestry Retail and Wholesale Trade Construction Utilities -300-600 -600-800 -1,200-1,700-2,000 Year-To-Date Employment Change In 2018, (000`s) Manufacturing -2,900 Source: Statistics Canada 12
Significant Pick-Up in Manufacturing Sales Manitoba Manufacturing Sales, Jan 2014 May 2018 (A 12-Month Moving Total of Monthly Sales in Millions of Dollars) 20,000 19,500 19,000 18,500 Manufacturing sales rebound in 2017 and accelerate in 2018 6.7% 18,000 17,500 17,000 16,500 16,000 3.3% -1.1% 2.0% 15,500 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Source: Statistics Canada 13
Manufacturing Sales Rebound in 2017 Machinery (11%) 14.2 Electrical Products (1%) 13.0 Transportation Equipment (16%) Fabricated Metals (5%) Food (25%) 8.4 9.2 9.1 Total Sales 6.7 Chemicals (8%) Primary Metals (11%) 4.8 4.7 Printing (3%) Wood Products (2%) -0.6 1.6 Manufacturing Sales in 2017, (%) Furniture (3%) -1.3 Source: Statistics Canada 14
Strengthening Manufacturing Sales in 2018 Chemicals (8%) 23.2 Fabricated Metals (5%) 15.3 Food (25%) 12.9 Transportation Equipment (16%) 10.7 Total Sales 8.8 Machinery (11%) Furniture (3%) Electrical Products (1%) Wood Products (2%) Primary Metals (11%) 1.0 0.9 0.5 2.6 3.8 Year-To-Date Manufacturing Sales in 2018, (%) Printing (3%) -2.3 Source: Statistics Canada 15
Growing Productive Manufacturing Capacity Capital Investment In Manufacturing, 2006-2018i (In Millions of Dollars) HyLife is expanding its Integrated Pork Production and Processing System. Adding more processing 800 capacity and up to four finisher sites. 700 600 500 400 300 200 100 0 Acceleration of capital spending on value-added processing within Canada 2006 2008 2010 2012 2014 2016 2018i Roquette is building the world s largest pea-protein processing facility in Manitoba. Simplot plans to more than double its food processing capacity for frozen french fries and formed potatoes. Increasing farm diversification and employment, especially in rural areas. Broadening Manitoba s export base and improving agriculture competitiveness and profitability. i Capital spending intention for 2018 Source: Statistics Canada 16
International Exports Manitoba International Merchandise Exports, Jan 2014 May 2018 (A 12-Month Moving Total of Monthly Export Sales in Millions of Dollars) 15,000 14,500 Increasing global demand lifting export sales 14,000 13,500 7.2% 2.2% -2.0% 2.7% 13,000 12,500 12,000 11,500 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Source: Statistics Canada 17
New Housing Positive trend since the early 2000 s. Housing Starts, 2000 2017 (Units) Housing starts topped the 7,000 mark in 2012, 2013 and 2017, the strongest since the mid-1980 s. Factors contributing to momentum: Record international immigration. Echo boom purchasing homes. Low mortgage rates and income growth. Demand for independent housing for seniors. General affordability of housing Housing starts should average 6,200 in 2018 and 6,500 in 2019. 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2000 2004 2008 2012 2016 Source: Statistics Canada 18
Housing Affordability Average Price of Homes Sold in June 2018 (Dollars) 800,000 700,000 600,000 Winnipeg was one of only two markets on our list that saw a small improvement in affordability in the first quarter [2018] Housing Trends and Affordability, RBC, July 2018. 573,396 716,259 500,000 Canadian Average 495,797 400,000 402,354 300,000 200,000 191,808 204,462 245,472 255,989 294,199 302,490 313,372 100,000 0 NB PE NS NL SK MB QC AB ON BC Source: Canadian Real Estate Association 19
Building Boom Manitoba Investment in Non-Residential Building Construction, Q4 2013 Q2 2018 (Quarterly at Annualized Total in Millions of Dollars) 2,250 2,000 1,750 15.0% 9.4% Expanding productive capacity with investment in commercial and industrial buildings -7.0% 9.6% 1,500 1,250 1,000 Institutional and Governmental Industrial 750 500 250 Commercial - Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Source: Statistics Canada 20
Economic Growth Comparison Real GDP Growth, 2013 2019f (Per Cent) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 2.5 2.8 Following a recovery from a commodity price shock, growth expected to moderate in the near-term 2.9 2.0 1.0 Canada Manitoba 1.2 1.4 1.7 3.0 2.5 2.0 1.9 Forecast 1.9 1.7 0.0 2013 2014 2015 2016 2017 2018f 2019f f Forecast based on Manitoba Finance Survey of Economic Forecasts Sources: Statistics Canada, Manitoba Bureau of Statistics and Manitoba Finance Survey of Economic Forecasts 21
Economic Outlook, 2018f-2019f Manitoba Finance Survey of Economic Forecasts (As at July 2018) 2018f 2019f Manitoba Canada Manitoba Canada Percent Growth Unless Noted Real GDP 1.9 2.0 1.7 1.9 Nominal GDP 3.9 4.2 3.7 4.1 Employment 0.6 1.2 0.7 0.9 Unemployment Rate (%) 5.8 5.8 5.6 5.8 Consumer Prices 2.4 2.3 2.0 2.1 f Forecast based on Manitoba Finance Survey of Economic Forecasts Source: Manitoba Finance Survey of Economic Forecasts 22
Key Message Growth in Canada is forecast to slow in 2018 and 2019. Manitoba and Canada are both projected to grow at a similar pace. Economic indicators are showing mixed results in 2018, some strengthening (manufacturing, exports and vehicle sales), others at a similar pace to last year (average weekly earnings, labour income and building permits) and some slowing (housing starts, home sales, base metal output and employment). Primary production is expected to slow in 2018, due to mine closures and following a bumper crop. Several major projects and events support growth: Roquette s new $400 million pea-protein production facility; Simplot s $460 million expansion; Canadian National Railway s announced $130 million in capital spending in 2018; and the Winnipeg Jets playoff run. Global growth is in line with expectations. U.S. near-term growth is strengthening, but projections have been revised down for the euro area, Japan, and the United Kingdom. 23
Uncertainties Potential Opportunities Stronger than expected increase in global demand. Stronger than expected support to domestic demand from strong population growth. Stable government infrastructure spending profile. Positive spillovers from U.S. fiscal stimulus (tax cuts) Higher base metal prices (+46%; nickel: +40%) have the potential to offer upside surprises to the economic outlook. Potential Risks The U.S. decision to challenge Canada s retaliatory tariffs at the World Trade Organization adds a new unexpected dimension to trade tensions. Rising interest rates and major tax changes in the U.S. and Canada could have a material impact on capital and labour mobility. NAFTA negotiations could significantly alter trade flows. Federal housing measures could destabilize a relatively balanced housing market in Manitoba. Extreme weather conditions. 24
Latest Economic and Financial Reports are available online: Manitoba Finance: http://www.gov.mb.ca/finance/ Economic Highlights: http://www.gov.mb.ca/finance/pubs/highlights.pdf Economic Statistics: http://www.gov.mb.ca/finance/pubs/statistics.pdf Manitoba Provincial Budget: https://www.gov.mb.ca/budget2017/index.html Thank you! 25