October 2012

Tables and Analysis

Introduction

The Quebec City census metropolitan region (CMA) put in a decent performance in the third quarter of 2012. The low unemployment rate (5.2%), the addition of 1,161 housing starts, the various projects under way (valued at $7.5 billion) and the many tourist attractions all helped to position the region among Canada’s top-ranked economies. Clearly, the region is not completely immune from global uncertainties, which will take time to disappear, thus moderating the growth of certain indicators. The lull in Quebec City’s employment market this summer serves as a reminder of this fact.

The fourth-quarter outlook is similar to the third-quarter outlook. The diversity of local investments and the industrial base will enable Quebec City to brave the headwinds still buffeting the global economy. However, this less than comfortable backdrop could prolong the lull in job creation for another three months.

All in all, the current outlook is slightly better than our expectations. Although our real GDP growth forecast is holding steady at 2% for the full year, other variables have been revised upwards. For example, the employment market still has room for available qualified workers. As a result, regional job creation will be up for the sixth year in a row. In addition, residential construction has benefited from the launch of a wide range of condominium and rental projects this year, thereby keeping the level of activity exceptionally high.

Employment Market

Employment Market

The Quebec City CMA set the bar very high in 2011, when a record number of jobs was recorded in the third quarter (436,300). Since then, the region has continued to experience steady economic growth, as evidenced by the 2.1% increase in real GDP in the first six months of the year. However, the region is still affected by uncertainties hovering over the world economy, which pushed the employment figures back down to a more sustainable level. In the third quarter of 2012, the metropolitan region had a total of 421,400 jobs, down 14,900 year-over-year.

The summertime lull was largely due to the difficulty in repeating the record-breaking performance of 2011, particularly in the construction industry and the manufacturing sector, both of which hired large numbers of workers last year. It would appear difficult for them to do better this year, although the activity level is still high. The construction industry remains robust due to the completion of several major projects (Complexe Jules Dallaire, Cité Desjardins, etc.), in addition to preparations surrounding the construction of Quebec City’s new amphitheatre and the expansion of Hôtel Dieu Hospital and Jean Lesage Airport.

For its part, the manufacturing sector is still hampered by the US economic recovery, which has been slow to materialize, as well as by the high-flying Canadian dollar. Although this is putting downward pressure on the number of jobs in the metropolitan region, hiring opportunities are still available. Demand for qualified workers remains high in key industries such as food processing and machinery manufacturing. In addition, activity at White Birch Paper began to pick up gradually in late August.

The regional services sector also took a bit of a break in the third quarter. Job creation continued in the areas of production services, healthcare and education, although these gains were offset by government austerity measures and upheaval in the consumer services sector.

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Unemployment Rate

Unemployment Rate

The dip in job creation in Quebec City in the third quarter was not seen in many other Canadian metropolitan regions. In addition, this distorted pattern may well continue into the fall. The fact remains, however, that demand for labour remains high in Quebec City, as evidenced by the low unemployment rate in the third quarter (5.2%). The region is among the top performers in Canada, with a net total of 5,000 jobs created in the first nine months of the year compared with the same period in 2011. As a result, we have revised our expectations upwards for the full year. We could see a net gain of between 2,000 and 3,000 jobs compared with 2011, whereas our forecast at the beginning of the year was for a zero net gain.

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Capital Investment

Capital Investment

The Quebec City and Chaudière-Appalaches regions generated a total of $10.2 billion in investments in 2011, or an annual growth rate of 2.6% (+6.2% for the province of Quebec). Taken together, these two regions accounted for 15.2% of capital expenditures in the province last year, good for third place.

According to the Quebec Institute of Statistics (ISQ), the outlook will be virtually the same in 2012 for the Quebec City and Chaudière-Appalaches regions, which are expected to record $10.4 billion in investments. That is still good for third place, just behind Montreal (21.1%) and Montérégie (16.6%).

The private sector invested $7 billion in the Quebec City and Chaudière-Appalaches regions in 2011, or an annual increase of 5.8%. Growth will continue in 2012 due to the predominant role of the services sector. Buoyed by the strong Canadian dollar, manufacturing expenditures will continue, thereby supporting regional companies’ efforts in the areas of innovation and competitiveness. Meanwhile, the housing market will remain active as projects are spread out over several phases, which means multi-year investments.

Public-sector investment has grown by a factor of 2.5 in the region over the past five years (1.8 in the province of Quebec), increasing its relative weight from 25% to 39%. The large number of road and land use projects will serve to maintain public expenditures in 2012.

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Venture Capital

Venture Capital

According to data published by Réseau Capital, venture capital investments topped $5.2 million in the Quebec City CMA in the third quarter, for an annual growth rate of 28.9%, driven primarily by increases in IT (+229.7%) and the traditional sector (+93.1%).

The robust third-quarter performance will also enable the Quebec City CMA to maintain its lead over last year. Between January and September, $25.3 million was invested in the region, or an annual increase of 64.7%. At that rate, the region will exceed the 2011 level ($27.2 million) and may well go on to top $30 million this year, as it did in 2009 and 2010.

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Demographic Snapshot

Demographic Snapshot

According to Statistics Canada’s latest census data, the Quebec City CMA was home to 765,706 people in 2011, up 6.5% from the 2006 census (+4.7% in the province of Quebec). Based on this fine performance, the region recorded the strongest growth in the province between the two census periods. In addition, the current results demonstrate that the metropolitan region may even be exceeding certain expectations. According to the ISQ’s “strong” scenario, the region is reportedly nearly one year ahead of the projection.

The improved demographic outlook reflects the natural increase (births less deaths) as well as a positive migratory balance. The number of births in Quebec City exceeds the number of deaths by more than 3,000 per year. This is primarily due to an ongoing baby boom (between 8,200 and 8,500 newborns per year). As regards the migratory balance, the Quebec City region welcomes more than 4,000 immigrants a year from other parts of Canada and from other countries. It should be noted that the number of international immigrants is approaching the 3,000 mark. The statistics also indicate that the region is a net attractor of people from other parts of Canada. Thanks to its robust economy, buoyant labour market, higher household incomes and good living conditions, the Quebec City region is increasingly attractive.

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