Think tank says city poised for a turnaround

Peter Hadekel

Le «modèle québécois»

The Montreal economy will have to face many of the long-term problems identified this week in a wide-ranging report on Quebec by TD Bank Financial Group.
These include: an aging work force, low productivity growth, poor educational skills, costly government and competitive pressure on the manufacturing industry.
Now, what about the short term?
Despite a disappointing performance last year, the city's economy seems set to turn around, according to the Conference Board of Canada.
In its latest metropolitan outlook, the board says that the hard-hit manufacturing sector is poised to grow for the first time since 2000.
Manufacturing had been walloped by a rising dollar and competition from overseas, losing an estimated 28,000 jobs in Montreal over the past two years alone.
But the exchange rate has now stabilized and many manufacturers have taken advantage of the currency's higher value to buy new machinery and equipment.
After registering no growth last year, manufacturing should pick up in 2007, with a forecast gain of 1.9 per cent. Aerospace, a key player, should lead the charge.
Overall, after growth of just 1.6 per cent in 2006, Montreal's economy should advance by 2.6 per cent this year and three per cent in 2008, according to the Conference Board.
The employment picture looks solid, too, with the city's jobless rate set to fall to 8.1 per cent this year from 8.4 per cent in 2006. Total employment is forecast to climb 1.7 per cent to 1.9 million.
One trend that has benefited Montreal is strength in the service sector, which has helped to cushion the fall in manufacturing.
The service economy has grown at a healthy annual clip over the past 10 years.
While growth in services dipped slightly in 2006, it should return to the more customary three-per-cent rate, led by retailing and financial services.
The construction industry, slowed by a continuing fall in housing starts, will remain sluggish this year, but non-residential activity should pick up if Montreal's two super-hospital projects get under way.
Meanwhile, the city's annual economic development report, covering the Montreal agglomeration, points to several encouraging trends.
Record levels of activity at the Port of Montreal and at Trudeau airport are reinforcing the city's position as a transportation hub.
The port set a record last year with 25.1 million tonnes of shipments handled, while airport traffic rose 4.7 per cent to a new high of 11.4 million passengers.
Another encouraging sign is that, while major job-creation projects remain rare, there is plenty of corporate expansion under way in Montreal.
Among projects announced last year:
- Mecachrome Canada, a parts supplier to the aircraft industry, is planning to expand its Montreal area-employment from 225 to 500.
- VMC Gamelabs, a U.S. company in the video game industry, is planning to create 300 jobs in Montreal.
- French company Alstom has chosen to make Montreal its headquarters for research and development in security systems for mass transit - an investment that should result in 200 jobs over the next two years.
- SAP Labs, a software development concern, is set to double the size of its facility and hire 90 more employees.
- CMC Electronics will invest $20 million in modernizing its plant and looks to hire 165 additional staff.
Yet obvious challenges remain. The city's report notes that growth in the tourism industry has been slowing down, particularly in visits by Americans.
Montreal has slipped to third in Canada as a centre for audiovisual production, behind Toronto and Vancouver. Just $99 million was spent last year on foreign film production, the lowest level in a decade.
The city is also struggling with demographic issues. Migration activity favoured Montreal since 1999, as more people arrived in the metro area than left.
But in 2006, there was a net migration deficit of 2,900 people, according to the Institut de la statistique du Quebec.
Overall, the city's population has gained slightly, thanks to an uptick in births in 2006.
But the biggest demographic challenge has yet to arrive: the full impact of the massive baby-boom retirement.

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