Manitoba's economy in black

November 13, 2009
Winnipeg Free Press
Written by: Martin Cash

Conference Board forecast for 2009 shows second-best result in country

Government stimulus spending, stable housing and construction sectors and the beginning of a recovery in the United States will keep the Manitoba economy in the black in 2009, according to the Conference Board of Canada.

On Thursday, the Ottawa-based think-tank published the most optimistic forecast for Manitoba yet, calling for positive growth in 2009 of 0.5 per cent and 2.5 per cent year-over-year growth for 2010.

This forecast gives Manitoba the second-best result in the country (behind P.E.I.) but it has the province falling back into the middle of the pack next year.

Both those results are at the highest end of the forecasts that are published regularly by the banks and a few institutions.

Prior to the release of the Conference Board's fall outlook, the average of the forecasts was for a 0.2 per cent contraction of the Manitoba economy in 2009 and 2.2 per cent growth in 2010.

Michael Benarroch, dean of the faculty of business and economics at the University of Winnipeg, said while the economic conditions in the province and across the country are better than they were at the beginning of the year, he does not believe it's clear sailing from here on.

"Right now, I would be a bit more cautious than that," he said. "There is a big question around manufacturing. We have lost a lot of jobs. A lot now depends on export markets and the recovery in the U.S. By no stretch are we out of the woods."

The Conference Board is forecasting an 8.5 per cent decline in manufacturing shipments in 2009 and a 3.5 per cent pickup in 2010 and an additional 4.2 per cent growth in 2011.

"I think 2.5 per cent growth for next year is a pretty good result for Manitoba," said Marie-Christine Bernard, an economist with the Conference Board. "The U.S. recovery will benefit some sectors, manufacturing in particular. General improvement in the economy will help see stronger employment growth and consumption come back."

The report indicates many Manitoba manufacturers have low inventory levels, which signals higher production for the future. It has retail sales off by 1.5 per cent this year and growing by 4.1 per cent next year.

On the housing side, it said the resale market has performed better than expected and new housing starts are expected to rise to 4,650 units in 2010.

The agricultural sector, however, is not expected to contribute to the growth formula next year.

A recent presentation to the Manitoba Association of Business Economists showed market prices for cattle, hogs, milling wheat, feed barley, oats, canola and flax are all below the break-even point.

But another presentation at that event showed that in 12 key economic indicators, Manitoba fared better than Canada in 2009 in every one.

A company like Ag Growth International Inc. is an example of a strong Manitoba performer with extraordinary growth in 2009 and expectations for more growth in 2010.

The company makes portable grain augers, conveyors and other grain-handling equipment.

It issued third-quarter results on Thursday with sales up 26 per cent for the first nine months of the year with profits more than doubled.

The company relies on the U.S. corn belt for about 70 per cent of its sales, which are more dependent on the volume of the crop than the actual price of the commodity.

"It is about the second-biggest crop in history coming off there," said Ag Growth's CEO, Rob Stenson. "They need a lot of grain-handling equipment to move this crop around."

The only disappointing element to the company's third quarter that featured $68.3 million in sales and $15.1 million in net earnings, was that the company's expected overseas sales have not yet materialized.

Stenson said that was mostly a result of the constraints in the credit markets, in particular in the grain belt of Russia, Ukraine and Kazakhstan. But he said the company remains optimistic about its prospects there.

martin.cash@freepress.mb.ca

What's in store across Canada

Here are the percentage GDP changes the Conference Board of Canada is forecasting for this year and 2010.

Republished from the Winnipeg Free Press print edition November 13, 2009 B4