ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwire - Oct. 12, 2011) - While Newfoundland & Labrador's growth levels are cooling, the province will still lead the country in 2011, according to the Provincial Monitor report released today by BMO Capital Markets Economics.

"Newfoundland & Labrador's economy is set to grow 3.5 per cent this year, ranking as the fastest-growing province in Canada," said Robert Kavcic, Economist, BMO Capital Markets. "Next year, growth will decelerate further as fiscal stimulus winds down, but for now, the taps remain fully open."

The biggest economic driver in the province right now is construction activity. "Government infrastructure spending is on pace to total more than $1 billion in fiscal 2011-2012 – representing more than 3 per cent of GDP – helping boost overall capital spending an expected 27 per cent in 2011 after a hefty 32 per cent jump last year," stated Mr. Kavcic. "The private sector is also pulling its weight, with projects such as the Vale nickel processing plant and offshore oil projects such as Hibernia South and Hebron – adding to the level of public-sector investment this year."

Other underlying economic trends are strong in the province, though starting to cool. "Employment was up a solid 2.2 per cent year-over-year in the three months through August, with both the private and public sectors seeing strong job growth, but growth has slowed from more than 10 per cent year-over-year in the spring," noted Mr. Kavcic. "Construction employment has seen massive growth thanks to the infrastructure investment, and it now makes up more than 8 per cent of the job market, twice the share seen just 7 years ago. Meantime, the jobless rate fell as low as 11.1 per cent in April before drifting back up to 13.7 per cent by August. Population growth and retail sales have also begun to moderate from strong rates, consistent with a cooling but still-strong economy."

"Even with some moderating, economic trends in Newfoundland & Labrador continue to benefit our commercial customers," said Jim Fallon, District Vice-President, Newfoundland & Labrador, BMO Bank of Montreal. "We look forward to continued strength for the province's businesses in the year ahead."

In this spring's Budget, the Province projected a $59 million surplus for fiscal 2011-2012 (0.2 per cent of GDP), after an estimated $485 million surplus in fiscal 2010-2011 (1.6 per cent). Budget balances were projected to switch to deficits in fiscal 2012-2013 and fiscal 2013-2014 ($496 million and $310 million, respectively), before returning to surplus in fiscal 2014-2014. "The Province will use an oil revenue windfall to boost net program spending by 4.9 per cent in fiscal 2011-2012 – hence the much smaller surplus this fiscal year," said Mr. Kavcic.

The full Provincial Monitor report can be downloaded at [ www.bmocm.com/economics ].

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