Commodity Boom Reshapes Economy in Quebec
In a review of recent economic developments, Philip Cross, chief of current economic analysis at Statistics Canada, notes that even as big price increases shift from one kind of commodity to another, the current market doesn't show any sign that the broad uptrend has ended.
For Canada, "it's like winning the geological lottery," he said yesterday, helping Canadians in ways that many of us don't even realize.
Big price hikes for gasoline and food products are causing alarm all over the world, for example, but they've been much smaller in Canada than right across the border in the U.S.
This is not because Canada is a producer of both, since we get no special price break from domestic producers.
Instead, it's because the skyrocketing price of most Canadian commodities has swelled our trade surplus, helping to boost the value of the Canadian dollar. Thus, oil and many fresh foods, priced in U.S. dollars, have had their dollar increases offset by the greenback's decline.
For example, gasoline shot up in price by 105 per cent in the U.S. between 2002 and 2007, but increased just 46 per cent in Canada. Some foods, like bread, pushed up by soaring grain prices, were offset by drops in others that are imported, so overall food prices rose only 2.7 per cent last year.
And whatever short-term turbulence in prices might be caused by flows of speculative money, Cross's analysis suggests that the broad uptrend in commodity prices isn't likely to flag very much over the coming years.
That could be true of some key sectors, like industrial metals, even this year, in spite of the giant U.S. market's severe economic slump. Why? Because the enormous demand for copper, nickel, steel and aluminum, among others, isn't as dependent on U.S. consumer spending as you might think.
Cross points out that growth in demand for these metals from China and India isn't really tied to the manufacture of items for export. Instead, it's fed largely by the buildup of infrastructure in these emerging industrial giants - things like roads, pipelines, airports, electricity and telephone systems, all needed to support a modern economy.
The commodity boom hasn't been entirely benign, of course. Any big economic change creates winners and losers, and the soaring value of energy and the Canadian dollar are a major problem for many Canadian manufacturing companies.
Energy is a cost of production, while the dollar's rise squeezes competitiveness in our important export markets.
Overall, manufacturing output has remained little changed over the past five years, but employment has plunged as firms seek to cut costs by becoming more productive.
And even if total factory output hasn't changed much, that's a bit misleading, Cross said: "Basically, half is growing like gangbusters and half is shrinking rapidly."
The victims of change include forestry, clothing and autos, all hit either by global competition or the U.S. housing collapse. The big winners include some innovative firms, like aerospace giant Bombardier and wireless phenomenon Research in Motion, maker of the Blackberry, as well as makers of petroleum-related equipment, refineries, chemical producers and metal smelters.
And perhaps the best news of all: The prosperity flowing from commodities has spread more evenly across the country over the years. Unemployment is at a record low, not only in the West, but in central Canada and the Maritimes.
That has been helped along as each region has followed the West in finding its own resources to exploit.
The Maritimes have offshore oil and gas, and this year Quebec will attract more metal-mining investment than any province, at $1.9 billion. Ontario is only a little behind, at $1.7 billion.