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Home > Logbook > Previous entries > 2008 perspectives


2008 perspectives: what to expect for the Montreal economy

TD Financial Group

Don Drummond
Senior Vice President and Chief Economist
TD Bank Financial Group

In 2008, Montreal's economy will be marked by adjustments to the strong Canadian dollar. This is especially true for export-oriented manufacturers that must also contend with a softening U.S. economy and tough global competitors.

Local manufacturers will begin to take fuller advantage of lower import prices and government depreciation incentives to bolster their competitiveness. A shift to higher value-added goods and services will also occur. Some high value-added sectors such as aerospace and advanced materials have global markets and will be less affected by softer U.S. demand and a weak U.S. dollar.

Service activities, more tied to healthy domestic conditions, will continue to grow firmly. Major non-residential construction projects will help.

Yet those tied-in to the fortunes of the currency, tourism for instance, will continue to struggle.

Mouvement Desjardins

François Dupuis

François Dupuis
Vice President and Chief Economist
Mouvement Desjardins

Montreal will face major challenges in 2008. Despite its diversification, the city’s economy will feel the pinch of the manufacturing sector’s woes. The strong dollar and fragile U.S. economy will wreak havoc on exporters. In this context, boosting productivity – which is now a vital issue – means not only increased business investment more but infrastructure renewal and modernization. The growing shortage of qualified labour will require additional training efforts and better integration of the immigrant pool. Innovation and knowledge must remain a priority, and we must continue to encourage R&D. More than ever before, we need a shared vision and strong leadership to bring promising projects to fruition.

National Bank of Canada

Clément Gignac

Clément Gignac
Senior Vice President, Chief Economist and Strategist
National Bank of Canada

Montreal’s economic environment in 2008:

In contrast to the downturn south of the border, Greater Montreal’s economy is robust. While economic activity is expected to slow both in Canada and the U.S. next year, the impending provincial elections should prompt the political parties to devise a wealth creation plan for Quebec and Montreal in particular. The fact is that despite the city’s many vibrant sectors (knowledge, health, culture, etc.), it is slowly losing ground to its North-American counterparts as a result of inadequate investments by the other levels of government in universities, research in general, and infrastructures. The stale debate and apparent rivalry between Montreal and the regions has got to stop. The time has come for globalization to be leveraged rather than endured. After all, when Montreal shines internationally, all of Quebec benefits.

RBC Financial Group

Amy Goldbloom Jimmy Jean
Economist
RBC Financial Group

A slowing U.S. economy, a dollar at parity, record high oil prices and fierce foreign competition are some of the challenges Montreal manufacturers will have to address in the near term. The good news is that strong consumer spending in 2007, fuelled by the pay equity settlement, along with a fairly healthy employment market, will continue to shore up the economy next year. Combined with the launch of some large public works projects and solid growth in non-residential construction, the Montreal economy should be able to overcome the obstacles and gradually improve into next year.

Laurentian Bank Securities

Carlos Leitao Carlos Leitao
Chief Economist
Laurentian Bank Securities

The Montreal economy in 2008 faces many of the same challenges it did this year, only compounded this time by significantly higher energy prices, a stronger Canadian dollar and weaker U.S. domestic demand. Hence, Montreal's tourism and export businesses will likely find it a more difficult environment than in the past two years. Also, econometric estimates suggest that the full impact of currency appreciation is only felt one and a half to two years later. This implies that the Montreal economy has only fully "digested" the rise in the Canadian dollar to about 87 US cents, the level prevailing from late 2005 to mid 2006. Nevertheless, interest rates are expected to remain relatively low and the labour market should continue to perform reasonably well, with gains in services sectors offsetting job losses in manufacturing. Domestic demand is thus healthy. Another major support to the metropolitan economy in 2008 will be substantial non-residential investment (both infrastructure and institutional) and a still favourable global aerospace cycle.

CIBC World Markets

Benjamin Tal Benjamin Tal
Senior Economist
CIBC World Markets

Montreal was unable to gain momentum and improve its standing in our Metro Monitor, a measure that captures economic momentum in Canada’s largest CMAs. The city is still in the middle of the pack, but last among the large metropolitan cities. Unfortunately due to the strong dollar and rapidly slowing US economy we expect both the manufacturing and tourism sectors to weaken even further in the coming 12 months – limiting any notable upside momentum in job creation. The housing market is likely to soften as well – but non-residential real estate activity and further improvement in the service sector will limit the damage.