Alberta to Lead Economic Growth in '06

A report put out by BMO last week predicts that resource-based economies primarily in the west will do very well in 2006. They expect the economies of Alberta and BC to be even stonger in '06 than they were in '05. Newfoundland is expected to outpace Alberta and BC as major developments in the mining and oil sectors ramp up to full production.

"Alberta's growth will be boosted by rising oil production and the ramping up of construction on oil sands mega-projects," BMO chief economist Rick Egelton said in the release.

Overall, the BMO report said the country's GDP will rise by 3.5 per cent, an increase from the 2.9 per cent growth in each of 2004 and 2005.

BMO's chief economist is reluctant to declare the collapse of the housing boom, but says he expects housing starts will drop in 2006 and beyond "as pent-up demand is fulfilled and as interest rates rise over the medium term."

Egelton said the Bank of Canada is likely to continue raising its key overnight lending rate.

"We expect the overnight rate to reach four per cent by April, and 4.5 per cent by the fall of 2006," he said.

He expects the Canadian dollar to trade in a range of 86.4 cents to 87.0 cents US over the next year.

The full report is available on the BMO website: http://www.bmo.com/economic/regular/regional122005.pdf