Rebound in manufacturing helps Canada's major cities

Montreal, Toronto, Vancouver top the list: Economic index

Canada's 25 largest cities have regained all the economic ground lost in the recession thanks to a rebound in manufacturing, according to a report by CIBC World Markets.

"Recent data on manufacturing production and shipments reveal a sector that is on the mend," said CIBC deputy chief economist Benjamin Tal in his latest Metro Monitor report. "While the over 65,000 new manufacturing jobs created in December clearly overstate the real health of the Canadian manufacturing sector, the direction is clear. The footprints of a recovering manufacturing sector are very evident."

Only two of Canada's 25 metropolitan areas showed negative growth in economic activity during the third quarter of 2010, said the report, based on CIBC’s metropolitan economic activity index. (CIBC's index approximates the change in level of economic activity in Canada’s 25 largest census metropolitan areas using variables that include population and employment growth, unemployment and housing starts.)

This was the smallest number in more than two years and a significant improvement over the third quarter of 2009 when 10 cities were in negative territory.

The city of Montreal ranked number one (at 26.8), up from the 10th spot a year earlier.

"The economic momentum in the city of Montreal has traditionally been correlated with activity in the manufacturing sector, and the recent improvement in that sector clearly played an important role in placing the city at the top of our cities' momentum ranking," said Tal.

Toronto’s economy (25) is not as strongly linked to the manufacturing sector as Montreal but it was able to enjoy the positive spin-offs from the improvement in the industry. The city also benefitted from an improving financial sector and some recovery in the economic activity of small and mid-size firms, said CIBC.

Despite the fading economic benefit of the 2010 Olympic Winter Games, Vancouver was able to sustain its ranking (19.4), reflecting strong population growth and a strong labour market.

"The most significant impact of the awaking manufacturing sector can be felt in smaller manufacturing-based cities such as Windsor, St. Catharines-Niagara (Ont.) and Saguenay (Que.), said Tal. "The economic momentum of these cities, as measured by our index, was in negative territory for most of the past two years. The recent recovery in the manufacturing sector has finally given these municipalities positive economic momentum.

"The city of Windsor is a prime example of the manufacturing-led recovery. Employment in the city has been rising for three consecutive quarters — a performance not seen since 2006. Same goes for the housing market with housing starts being in positive territory for almost a year — the best performance since 2004."

While the relative importance of manufacturing activity in the Canadian economy as a whole has been on a decline, the recent improvement in the sector shows it is still extremely important in its contribution to overall economic growth and, more importantly, its ability to reshape the economies of Canada's major urban centers, said Tal.

"Just as we have seen a recent rebound in manufacturing in the (United States), the sector in Canada's major cities is also showing some life,” he said. “With more than two-thirds of Canadian GDP generated in Canada's major cities, the tale of those cities is the tale of the economy."

The complete CIBC World Markets report is available at:


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