Although the pace of overall economic activity year to date in Saskatchewan has downshifted somewhat compared to the same period in 2010, on balance most of the key indicators of economic activity in the province suggest it is continuing to exhibit a relatively strong, balanced pattern of growth.
Turning first to major components of domestic demand, consumer spending, as reflected by growth of retail sales, is up by 6.4% year to date in 2011 compared to a 3.7% y/y gain during the same period in 2010.
Also, while year to date growth of residential construction is not as strong as it was in 2010, housing starts in the first six months of 2011 are up by 30.8% compared to the same period in 2010.
Sales of existing homes in the province are up by 7.3% year to date (June) while the average price of homes sold in the province is up by 5.1% y/y.
Despite a significant slowing in two (industrial and institutional) of its three major components, the total value of non-residential building approvals in Saskatchewan is up by 7.5% year to date due to a very strong 22% gain in commercial building plans.
Finally, strong global demand for potash, plus a concomitant rise in foreign sales of agricultural and forest products has combined to drive the province’s exports up by a very respectable 8.0% year to date.
Looking forward, despite a subpar outlook for the province’s agriculture sector due to excessively wet weather, the prospect for sustained strong demand for commodities in general and for potash in particular should continue to underpin Saskatchewan’s economic growth during the remainder of 2011 and through 2012.
In addition, evidence of strong labour demand reflected by steady decline in the province’s unemployment rate to its lowest level since August of 2010, suggests that net migration to the province will remain strong and serve to drive the growth of residential construction over the next several quarters at least.
Finally, based on Enterprise Saskatchewan’s Major Project Inventory (MPI), the outlook for both residential and non-residential construction remains quite robust despite the phasing out of the federal government’s infrastructure stimulus package and a sharp pull back of investment in industrial/manufacturing projects.
Following growth of 4.5% in 2010, growth in 2011 should be in the range of 3.5% to 4% due to the combination of strong domestic and external demand. Assuming that weather conditions normalize in 2012, overall growth should accelerate into the range of 4.5% to 5%.