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Provincial and Territorial Economic Accounts Review

2006 preliminary estimates


Alberta, the economic powerhouse, led the country in economic growth for the third consecutive year in 2006. Economic growth was generally more vigorous among western provinces than in central and eastern provinces in 2006.

Overall, real gross domestic product for Canada eased slightly from 2.9% in 2005 to 2.7% in 2006. Across the country, investment, trade and financial services all contributed as services production generally outpaced goods production.

National labour income grew 6.1% and consumer spending rose 4.1% while home building reached a new peak in 2006.

Chart 1-a Real Gross Domestic Product, 2006
Chart 1-a Real Gross Domestic Product, 2006

Economic growth in Alberta (+6.8%) was more than double the national average. Alberta maintained its impressive lead over other provinces for the third consecutive year. Oil prices continued to rise throughout 2006, spurring investment in Alberta’s oilsands, which in turn benefited most areas of the economy.

Much of the rest of Canada lagged the national pace, as a 6.8% gain in the value of the Canadian dollar and higher oil prices hampered production, especially in manufacturing. Lower U.S. demand also restrained exports. After Alberta, the only other provinces that managed to top the 2006 national growth rate were Newfoundland and Labrador (+2.8%), Manitoba (+3.3%) and British Columbia (+3.6%).

Goods production puts on a strong showing in Western Canada

Economic growth in Alberta was well above the Canadian average for the fourth year in succession. Oil prices continued to advance in 2006, spurring corporate profits and business investment, which, in turn, stimulated labour income and spending.

The buoyant economic conditions and a low unemployment rate (3.4%) attracted people from across Canada. The province’s infrastructure strained to accept 57,000 inter-provincial migrants. Residential construction increased 8.1%, and consumer spending accelerated for the third consecutive year, to 7.9%. The gain in 2006 was particularly important among durable goods (+15%).

Manufacturing activity in Alberta jumped 7.6% after a 6.3% increase in 2005, with most of the growth coming from petro-chemical industries, or those supplying machinery and equipment to the burgeoning oilsands infrastructure projects.

The full benefit of oilsands investment has yet to be seen, but in 2006 the production slowdowns of the prior year were overcome as oil extraction output rose 3.5% and exports of oil products moved in step.

Output in Manitoba advanced 3.3% after a 2.7% increase in 2005, reflecting the best crop in three years. The ideal growing conditions in 2006 allowed for strong exports of canola and wheat.

Low interest rates and a solid employment picture continued to stimulate demand for new housing and consumer spending on durable goods. Business investment in non-residential structures leapt ahead 32%, with building projects in Winnipeg and additions to the electric power infrastructure.

British Columbia outpaced the national average growth for the fifth consecutive year with a 3.6% increase in 2006 slightly behind the 3.7% increase in 2005.

Forestry output increased moderately but continued strength in the Canadian dollar and lower U.S. demand restrained wood exports. Pulp and paper exports meanwhile benefited from a strengthening of world demand.

The construction industry benefitted from investment relating to the 2010 Olympics. Services activities outpaced goods production in 2006. Lower output of coal and electricity restrained growth in the goods sector.

Labour income growth and continued low unemployment boosted home building. Consumer spending particularly on durable goods rose sharply as new homeowners increased their spending on home furnishings.

Saskatchewan’s economic production grew modestly in 2006 (+0.4%), a slowdown from 3.1% in 2005. Production of uranium, potash and wheat fell. Corporate profits remained strong, however, as world demand for these products kept prices high.

Manufacturing of machinery and equipment in Saskatchewan benefited from Alberta’s robust investment picture. Labour income strength contributed to home building and a pick up in consumer spending.

Energy costs, foreign competition and the exchange rate squeeze Central Canada

As the fortunes of the western provinces hinged on resource production, Central Canada felt the pinch of high fuel prices on economic activity. In addition, a strong Canadian dollar dampened export demand and therefore goods production.

In Ontario growth reached 1.9% in 2006, weaker than the 2.8% advance in 2005. In manufacturing, production dropped in 14 of 21 major industry groups resulting in the steepest decline in manufacturing (-3.5%) in several years. Motor vehicle producers curtailed production and parts producers were particularly hard hit by U.S. market conditions.

The weakness in the manufacturing sector was not felt throughout the economy as service production benefited from continued labour income strength and ongoing construction investment.

Ontario supplied many of the migrants to Alberta’s booming economy. Overall strength in the service producing industries allowed the unemployment rate to fall to 6.3%.

Quebec’s economy grew 1.7% in 2006 after posting a 2.2% increase in 2005. Production of services outpaced goods as manufacturing edged down 0.2%. The decline was muted by buoyant export markets for aerospace products. Primary metal production picked up as world prices remained high, and pharmaceutical manufacturers recovered from three years of decline.

Not all manufacturers benefited as Quebec’s forest and paper industry was hard hit with mill closures and layoffs. Exports of wood and paper products declined precipitously.

Overall, labour income remained strong, and personal expenditure built on increases of 2005.

In Atlantic Canada, activity picked up in Newfoundland and Labrador and New Brunswick

The Newfoundland and Labrador economy advanced 2.8% in 2006, compared to 0.4% in 2005. The first full year of production at the Voisey’s Bay Nickel mine and the White Rose oil field contributed largely to the advance. Corporate profits benefited from high commodity prices. Consumers took advantage of continued low interest rates and accelerated expenditures.

After increasing 0.3% in 2005, the New Brunswick economy rose 2.6% in 2006. A recovery in pulp and newsprint prices in 2006 spurred the re-opening of two mills, and helped manufacturing advance.

More jobs and labour income gains led to higher new motor vehicle sales for the first time in four years. Investment grew sharply in 2006, as a number of building projects reached completion.

A recovery in agriculture helped Prince Edward Island’s economy rise 2.0% in 2006 comparable to the 2.1% growth in 2005. The potato crop recovered from a poor 2005 harvest, fuelling gains in consumer spending. Home-building waned in the province but construction workers turned to a number of building projects, including a wind farm at the east end of the island.

Economic output in Nova Scotia rose 1.1% in 2006, compared to 1.6% the previous year. Manufacturing activity fell for the second consecutive year as production slowed in rubber and plastic industries and labour unrest hampered wood product fabrication.

The province benefited from a number of construction projects in the Halifax area. Labour income advances filtered through to consumer spending particularly on big ticket items.

A solid year for all three territories

Advances in territorial economic growth were almost entirely hinged on resources, in particular on mineral extraction and exploration.

The Nunavut economy grew by 5.8%, its best performance since 2002 and a turnaround from the decline of 1.1% in 2005. Jericho – Canada’s third diamond mine – began production in January of 2006 and accounted for corporate profit growth and a resurgence in exports. As in the other territories, mineral exploration benefited from high commodity prices.

The Northwest Territories’ economy advanced 2.0% in 2006, an improvement over 2005 (+0.1%). Diamond mining fell slightly in 2006 but mineral and oil exploration flourished in the Northwest Territories, particularly along the Mackenzie Valley corridor. Construction investment also advanced at the Snap Lake diamond mine.

Output in the Yukon advanced 2.9% after the torrid (+5.2%) pace of 2005. High commodity prices spurred exploration activity, particularly for gold, zinc, uranium and copper. The investment activity gave a lift to wholesalers as demand for machinery and equipment increased. New store openings paralleled growth in labour income.

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Date modified: 2007-04-25 Important Notices
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