Tableau de bord, région métropolitaine de Montréal = Trend chart, Greater Montreal region, 1 mars 2001, Anglais

[" LITAN QUARTERLY PUBLICATION OF STATISTICAL ANALYSIS OF THE BOARD OF TRADE OF METROPOLITAN MONTREAL PRODUCED IN PARTNERSHIP WITH CANADA ECONOMIC DEVELOPMENT VOLUME 3, NO 3, MARCH 200 1 HIGHLIGHTS MONTREAL: HIGH PRODUCTIVITY, BUT NO JOBS This seems to have been Montreal\u2019s heartbreaking reality for the past year: the car is racing ahead on a full tank, yet the engine is misfiring.This is particularly true with regard to employment.In fact the unemployment rate jumped from 6.5% one year ago to 8.5% in January 2001.And, aside from a slight January thaw, employment levels have dropped steadily throughout this period.Meanwhile, Quebec\u2019s GDP is growing like gangbusters: up 4% last year after a similar performance in 1999, something we haven\u2019t seen in 12 years.The manufacturing sector, representing 22% of the GDP, has now surpassed the Canadian average, primarily because of the so-called \u201cnew\u201d economy.Based on the constant dollar GDP, electric and electronic products have become the most important industry in this sector, and Montreal is no stranger to this performance.This industry is thus creating great jobs, but not enough of them.At the same time, the traditional economy is showing signs of weakness - especially the clothing industry, which once employed a significant number of people.The restructuring of the Montreal economy is clearly a work in progress.REASONS TO CELEBRATE ¦\tOptions are raising spirits at the Bourse de Montréal ¦\tTourists love Montreal ¦\tGDP: Montreal slightly ahead according the Conference Board of Canada REASONS FOR CONCERN ¦\tFinancial and professional services : fewer jobs ¦\tConsumers are sitting on their wallets CED REPORT A slowdown has already begun in the U.S.Is the Montreal economy in a better position than it was in 1990 to deal with it?1+1 Canada Economic\tDéveloppement Development\téconomique Canada Canada 2 North Belt Laval South Belt Montreal MAP of THE METROPOLITAN AREA ¦ Montreal, Laval and North and South Belts Population: 3.3 million 55% of Quebec\u2019s GDP 1.7 million jobs 111 municipalities Corporate tax: 75% of Quebec\u2019s total contribution THE FOLLOWING STATISTICS cover the census metropolitan area (CMA).Where unavailable, the MUC territory or the City of Montreal were included.These are the latest statistics available at the time of printing Data collected with the help of ROYAL BANK FINANCIAL GROUP' Published and distributed free of charge by Leadership Ukmlifkd.the Board of Trade of Metropolitan Montreal\u2019s monthly journal THE TREND CHART for Greater Montreal is open to the participation of any organization dedicated to the progress of the metropolitan region.Reproduction of this document, in whole or in part, is authorized with credit to the Board of Trade of Metropolitan Montreal.Publication director: Jean-Pierre Langlois, economist Telephone: (514) 871-4000, ext.4070 Fax: (514) 871-1255 E-mail: jplanglois@ccmm.qc.ca Available on the Board of Trade\u2019s Web site at: www.btmm.qc.ca/presse/tdb 3 3.\tMAIN FEATURES TABLE OF CONTENTS \u2022\tEmployment in health care (employment) 4 \u2022\tEmployment in the financial sector\t4 (employment) \u2022\tEmployment in professional services\t5 (employment) 4.\tMACROECONOMICS\t6 The gross domestic product \u2022\tGDP of Canadian metropolitan areas\t6 Employment \u2022\tUnemployment rates\t7 \u2022\tJob creation\t7 \u2022\tHelp Wanted Index\t8 \u2022\tWork stoppages\t9 \u2022\tEmployment in the new economy\t9 Earnings and expenses \u2022\tIncome inequality\t10 Prices \u2022\tConsumer Price Index\t11 5.\tSECTORIAL ECONOMY\t12 Tourism \u2022\tHotel occupancy rate in Greater Montreal 12 Real Estate \u2022\tHousing starts\t12 \u2022\tResale market\t13 \u2022\tOffice vacancy rates\t14 Retail market \u2022\tSales\t15 Financial sector \u2022\tSmall-cap stocks\t15 \u2022\tBourse de Montréal in 2000\t16 6.\tSPECIFIC ECONOMIC SECTORS 17 Computerization \u2022\tInternet use\t17 7.\tQUALITY OF LIFE\t18 Education \u2022\tTuition fees\t18 8.\tCANADA ECONOMIC DEVELOPMENT REPORT\t19 \u2022\tMontreal on the eve of an economic slowdown\t19 Economic Development VJC11I cXVJlCl ¦\t¦ Canada Economic Développement ¦\tDevelopment économique Canada Canada In the global marketplace, entrepreneurship as well as partnerships, innovation and exports are key to business success.Canada Economic Development is geared to making the wheel turn in the right direction.We stimulate the growth of the Quebec economy by encouraging a dynamic business climate.Our goal:To promote small business excellence.Going Farther, Faster Small Business Excellence w tfc X Chambre de commerce du Montréal métropolitain Board ot Trade f of Metropolitan Montreal 5 Place Ville Marie, plaza level, suite 12500, Montreal, Québec H3B 4Y2 Telephone: (514) 871-4000 Fax: (514) 871-1255 E-mail: info@ccmm.qc.ca MAIN FEATURES HEALTH CARE IN MONTREAL: FEW NEW EMPLOYEES IN THE 1990S During the 1990s, the number of employees in the health-care and social-assistance sector grew by just 6% in Montreal.On the other hand, Toronto (+16%) and especially Calgary (+29%) and Vancouver (+43%), saw employment figures rise significantly in this sector.No doubt a reflection of the major role played by government in the Quebec economy, the number of employees in Montreal hospitals is still much higher than those in other components of this sector such as outpatient treatment, nursing, and social assistance - the reverse of other major Canadian cities.Despite the significant reduction in personnel in Quebec hospitals during the 1990s, there are still more employees in Montreal hospitals than in Toronto hospitals.In 1987, there were more staff members in Quebec hospitals than in Ontario hospitals.During the 1990s, there was an increase in the relative importance of outpatient treatment (doctors\u2019, dentists\u2019, and optometrists\u2019 offices, etc.) and social assistance services -except in Montreal, where they increased only slightly.Unlike the situation in hospitals, the number of people involved in outpatient treatment is twice as large in Toronto as in Montreal.Finally, west of Toronto, all health care components grew in the 1990s.Employment in Health Care 250 200 150 100 50 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: Statistics Canada Montreal mmmm Vancouver Calgary THE FINANCIAL SECTOR IN THE 90S: TORONTO\u2019S INFLUENCE CONTINUES TO GROW Contrary to what you might think, Montreal\u2019s financial sector did not lose ground during the I990\u2019s - at least, if employment figures are any indication.Between 1989 and 1999, the total number of jobs in this sector grew by 1.5%.When we break down this percentage, we see that the subsector encompassing banks, credit unions, trust companies, and securities shrank by 2.8%, while the insurance sub-sector grew by 10.3%.Strangely enough, the entire province of Quebec registered a 3.9% gain in the first sub-sector and a 4.5% loss in the second.Where the shoe pinches, however, is in comparisons with other Canadian centers and the country as a whole.During this same period, overall gains of 12.2% were posted by Toronto, 16.4% by Vancouver, and 26.4% by Calgary.Above all, it was the financial sector itself that moved west of the Outaouais: Toronto thus grew by 24% during the 1990s, Vancouver by 10.4%, and Calgary by 34.1%.Mon- Employment in the financial sector (finance and assurance) Source: Statistics Canada 1994 1995\t1996\t1997 1998\t1999 Montreal\t\tVancouver\tHB Toronto\t\tCalgary\tIII 5 treal thus continues to lose its relative importance in this sector.And if we took 1987 as our starting point, we would see that Montreal had lost an even larger market share.It is in the largest sector that losses were heaviest in Montreal, i.e.banks, credit companies, and trust companies: between 1989 and 1999, 7,000 jobs were lost in this sector (an 18% shrinkage).Insurance, the second largest sector, also lost 3,400 jobs (or -20%).Fortunately, the number of insurance agents and brokers grew by 3,000 (or +96%) during this period.While the numbers of those involved in credit and securities remained stable, there was an increase in other financial investment activities: venture capital companies, investment advisors, and mutual fund companies, for example.A SIGNIFICANT INCREASE IN PROFESSIONAL SERVICES Although they account for only a relatively small percentage of all jobs in the service industry, jobs in the professional, scientific, and technical services are key.Moreover, their numbers have grown rapidly over the past twelve years - by 94% in Montreal, by 97% in Calgary, by 86% in Vancouver, and by 76% in Toronto.In Montreal, jobs in computer systems design - a subgroup of professional services - have grown by leaps and bounds since 1993 - a spectacular 220%.In Toronto, growth has been even more frenzied - 334% since 1992 -with Vancouver close behind at 329%.In addition, with an increase of 243% since 1994, Calgary is just slightly ahead of Montreal.These figures are a sign of modem, dynamic economies competing effectively with each other.Interestingly enough, the computer systems subgroup seems to be setting the pace for the professional services sector as a whole, its jobs giving shape to the curve of the larger group.Employment in the financial sector (finance and assurance) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 It is also useful to note that the most dynamic economies Source: Statistics Canada are those in which jobs in computer systems design, architecture, engineering, prospecting and design, management advisory services, and scientific and technical advisory services are proportionally most important.While Montreal performs very well in the computer systems subgroup, it tends to lose ground in the architecture, engineering, prospecting and design subgroup.Propelled by the boom period of thel990s, Calgary has 43% of its professional services jobs in architecture and engineering, while the corresponding figure for Montreal is just 18%.Montreal mm\tVancouver an Toronto n\tCalgary m MACROECONOMICS THE GROSS DOMESTIC PRODUCT PROJECTED GDPS: MONTREAL SLIGHTLY AHEAD The Conference Board of Canada remains firm on this point: of Canada\u2019s major urban centers, Montreal will continue to enjoy a slight advantage in the gross domestic product over the next few years.Assuming, of course, that the U.S.economy continues to evolve as expected, that is, just slightly less well than last year.Indeed, through its exports, the Canadian economy, and consequently that of its major centers, is largely dependent on the fortunes of our neighbour to the south.As usual, the secret of Montreal\u2019s strength lies in the vitality of its new economy.\u201cGains in productivity are thus better there than in other parts of the country because of its new technologies,\u201d observes Louis Thériault, the man in charge of metropolitan forecasts for the Ottawa-based Conference Board.In 1987, the percentage of jobs in Montreal\u2019s manufacturing and multimedia sectors held by high-tech workers (telecommunications, biotechnology, multi-media, and aeronautics) was just 18%, compared to 34% in 2000.If history repeats itself, Montreal and Toronto - but especially Toronto - could suffer more from a marked slowdown in the American economy than other Canadian centers because of the openness of these diversified economies to the U.S.giant.For the moment, there is no reason to think the U.S.is about to sink into a harsh recession.So Montreal may indeed fare as well as the Conference Board predicts.Projected GDP Growth for Canadian Metropolitan Areas %\tAnnual Variation in % H 2000\t2001\t2002\t2003\t2004\t2005 Source: Conference Board of Canada Montreal hhhi Vancouver ¦¦¦¦ Toronto\tCalgary ¦¦¦¦ Quebec (CMA) mh 7 EMPLOYMENT UNEMPLOYMENT: MONTREAL FALLS FROM GRACE While Montreal\u2019s unemployment rate managed to distance itself from the Quebec average for the past two years, the gap closed in January when Montreal\u2019s 8.5% was almost identical to Quebec\u2019s 8.6%.At the top of its form in January 1999, Montreal was then 1.7% below the province as a whole (6.5% vs.8.2%) What caused Montreal to fall from its hard-won state of grace?As we indicate in the section on job creation, Montreal has not created enough new jobs to compensate for the listless performance of some segments of its economy: consumer services and non-durable goods, but also teaching or information, culture, and leisure.Somewhat reserved in terms of gross job creation, the new economy is not yet meeting expectations in this regard.Elsewhere in Canada, the unemployment situation is still tolerable.In the country as a whole, the unemployment rate seems to have been firmly entrenched below 7% for the past year.As usual, the prairie provinces lead the way with rates of about 5%.Ontario, and especially Toronto, are next in line.Although job creation has faltered somewhat in Toronto recently, its unemployment rate fell to 5.4% in January.After witnessing the spectacular recovery of its labour market last year, Vancouver has been singing the blues for some time now.It appears the slowdown of the U.S.economy is not about to spare anyone.Unemployment rate deseasonalized Jan.96 Jan.97 Jan.98 Jan.99 Jan.00 Jan.01 Montreal Toronto Calgary Vancouver Source: Statistics Canada JOB CREATION: MONTREAL LOSES, THOUGH QUEBEC WINS Except for January, when employment was up in Montreal, the metropolis lost jobs steadily in 2000, while the rest of Quebec did just the opposite: 63,300 jobs lost versus 89,100 gained, respectively.On the whole, Quebec thus created 25,800 jobs between December 1999 and December 2000.Overall, of course, 2000 was a better year for Montreal than 1999, but that does not change the fact that, unlike in the rest of the province, the trend here was downward last year.Montreal\u2019s manufacturing sector continues to bear the brunt of some unavoidable structural and cyclical factors.During the above-mentioned period, Montreal thus lost 48,700 jobs in this sector while the rest of Quebec saw an 8 increase of 5,400.It is as though the older, more traditional economy cannot keep pace with Montreal\u2019s new economy, which is doing just fine.Among those sectors lagging furthest behind is the clothing industry.Within the service industry, the teaching sector lost 25,500 jobs, many at universities, while the rest of Quebec gained 11,500.For the first time in a long time, it has become clear that employment has entered a period of negative growth in Canada.While Montreal has been atypical for some time, other centers have recently begun to see a decline in their employment rate (number of employed persons expressed as a percentage of the labour force) and, to a lesser extent, in their labour force participation rate (the percentage of people who are employed).It is becoming more and more evident that the predicted slowdown has already begun.The only question now is how severe it will be.Job creation annual variation Deseasonalized data Jan.99 Jan.98 Jan.00 Jan.Ot Jan.97 Source: Statistics Canada Montreal Toronto Vancouver JOB OFFERS: FINALLY A DOWNTURN Is this just a blip in the charts, as we witnessed last year, or could it be the start of a more significant decline?That is the question raised by the most recent help wanted figures.But given the somewhat negative implications of the latest economic indicators, we tend to think we are seeing the launch of a sustained nosedive - accompanied by a contraction in employment.In January, the Montreal index lost 2.4%, twice as much as the province of Quebec (1.2%).If this leading indicator truly reflects the job situation in Montreal compared to that in the rest of the province in 2000, it does not bode well for the coming months.Montreal could continue to sink while Quebec remains on an even keel.And while this indicator is not infallible - far from it - it does merit serious attention.Elsewhere in the country, every province except Prince Edward Island and Manitoba saw its help wanted index fall in January.In December, only three provinces registered losses.Could we be seeing the beginning of an overall decline?We\u2019re afraid so: in January, every major center whose progress we are monitoring reported a downswing in this area, with the big loser being Vancouver, whose index dropped 6.4% - a considerable contraction in just one month.Help wanted index 1996 = 100 Smoothed, seasonally adjusted data Jan.98 Jan.99 Jan.00 Jan.01 Jan.96 Jan.97 Source: Statistics Canada Montreal Toronto Calgary Vancouver 9 STRIKES AND LOCKOUTS: VANCOUVER TAKES THE CAKE Although work stoppages took a bigger toll on Montreal in the third quarter of year 2000 than they had since the beginning of the year, there is every indication they will be less onerous that year than those experienced by Canada\u2019s two other major cities.Toronto is expected to reach heights it has not seen since at least 1993, and Vancouver, especially, will shake off its usual reserve in this area.In fact, Vancouver, and by extension British Columbia, will post the highest number of person-days lost in quite some time.The major culprits in the case of Vancouver are its city hall employees, who were responsible for 65% of all work stoppages in the third quarter.The remaining 35% of work stoppages were caused by employees of the Greater Vancouver Hotel and Premium Brands Ltd.In Ontario, notably, work stoppages caused little damage to Toronto\u2019s economy during that same quarter.The following companies were the biggest source of strikes and lockouts there: Falconbridge, Steelwire Ltd., Pardale Works, Ferranti-Packard Transformers, Toromont, and Zehrmart Inc.Work stoppages Companies in all categories n 03 Q_ 450.000 400.000 350.000 300.000 250.000 200.000 150.000 100.000 50,000 0 Source: Human Resources Development Canada Note*: annualized data Montreal ¦¦¦¦ Vancouver Toronto mmmm Finally, Quebec was on its best behavior in this regard, with only Westroc in Sainte-Catherine and the Société de la Place des Arts in Montreal outdoing other companies by a small margin.TECHNOLOGY HUB: MONTREAL OUTDOES ITSELF Fourteenth in terms of population, Montreal ranks tenth among North American metro areas for employment within large companies in the New Economy sectors.Even more impressive, Monteal ranks fourth in per capita employment behind San Francisco/Silicon Valley, Seattle, and Boston.These are the findings announced recently by Montréal Techno Vision in a document outlining a variety of performance indicators concerning high-tech companies.Montreal is doing well on a sector-by-sector basis as well.In fact, in terms of employment in companies of 100 employees or more, the Montreal area is 5th in aerospace, 8th in biopharmaceuticals, and 9th in information technologies.In more specialized areas, Montreal ranks 1st in both engine manufacturing and maintenance and biopharmaceu-tical contract research.Moreover, it is in 5th place in telecommunications equipment manufacturing.Employment by technology companies (2000) Companies in the private sector with 100 employees or more #0?4?4?i?4?4?#\t£ J?# 4?1\t# £ Source: Montréal TechnoVision, Performance indicators 2000 10 There are a few cautionary notes, however.Montreal\u2019s position as a North American center of innovation and research was shaken by cutbacks in university and research funding by government in the second half of the 1990s.This has led recently to an increasing dependence on the private sector, raising concerns among some that university researchers will lose their independence.Moreover, like many major metro areas, Montreal is having trouble keeping pace with the demand for university graduates in high-tech sectors.Recent signs of a correction are emerging, however, at least in some sectors.EARNINGS AND EXPENSES INCOME INEQUALITY: TORONTO TOPS THE LIST Between 1980 and 1995, earned income was more and more concentrated in rich neighborhoods, while unemployment was concentrated mostly in poor ones.Such were the findings of a Statistics Canada study of Canada\u2019s eight largest cities.Toronto had the largest gap between high-and low-income neighborhoods.Montreal came second, and Ottawa-Hull and Quebec City were in last place.During those same fifteen years, earned income in the poorest neighborhoods dropped between 11 and 33% in the eight cities: Montreal, Quebec City, Ottawa-Hull, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver.The richest neighborhoods, on the other hand, saw increases of between 1 and 16%.While unemployment was higher in 1995 than in 1980, the increased inequality between neighborhoods was not linked to the economic cycle.Employment became more and more concentrated in areas with the highest incomes and unemployment in the areas with the lowest incomes.In Toronto, the employment rate for adults between 25 and 54 in low-income neighborhoods dropped from 75% to 60% between 1980 and 1995.Income inequalities between neighbourhoods Montreal Vancouver Toronto Calgary Source: Statistics Canada Quebec Finally, increased transfer payments such as for employment insurance, welfare, and child benefits compensated only slightly for the widening income disparity between rich and poor neighborhoods. 11 PRICES INFLATION: A NINE-YEAR HIGH Since inflation is closely linked to economic activity, prices are now rising faster in Canada than in our neighbor to the south.This, of course, is a reflection of business conditions in the two North American countries.The same holds true for the major Canadian cities, whose inflation rate seems to mirror their GDP.Toronto\u2019s CPI is thus higher than the Canadian average, while Vancouver\u2019s has now surpassed Montreal\u2019s.Although the price of oil jumped so high in Quebec last December it affected the index for the entire country, energy costs were still lower here than in the rest of Canada.The same was true for food.Yet the overall price increase in Quebec (and Montreal) was identical to that in Canada: 0.1% or a very tiny upswing compared to increases in previous months.Quebec\u2019s low oil and food prices were thus offset by increases in the cost of shoes, clothing, and housing.In fact, Montreal housing prices rose sharply in 2000, particularly toward the end of the year.Inflation Consumer price index Dec.96 Dec.97 Dec.98 Dec.99 Source: Statistic Canada Toronto Vancouver wmmm Montreal I In annual variation, the December increase (+3.2% in Canada and +2.9% in Montreal) was the highest it\u2019s been in ages, although it is true that levels at the end of 1999 were particularly low.Given the slowdown begun in the United States, there is no reason to hope that Canada will escape the impact this will have on price increases. 12 SECTORIAL ECONOMY TOURISM TOURISM: MONTREAL SHOULD STAY THE COURSE IN 2001 After posting excellent results in 2000, Montreal tourism is still holding its own.If the oracles are correct, the number of tourists should increase by 2% this year, compared to 4% last year.The picture is slightly less rosy in the area of business tourism.In fact prospects for multi-hotel conventions in Montreal lead us to predict a significant drop in the number of convention delegates this year.If so, Montreal will not be the only region afflicted: other cities in Eastern Canada, including Toronto, will suffer the same fate.However, the situation should improve in 2002.For the whole of last year, the occupancy rate for Montreal hotels stood at 71.3%, compared to 70.8% the previous year.This is all the more commendable in that there was a simultaneous increase in the number of hotel rooms on the market.Moreover, while this increase may appear negligible, when you consider that Montreal and Edmonton were the only two Canadian cities to post gains between January and October 2000 (the most recent period for which figures are available), it is actually quite a feat.Canada\u2019s tourism industry did not perform as well as expected last year.Greater Montreal hotel occupancy rates Seasonnally adjusted 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: Hotel Association of greter Montreal * Seasonally adjusted by the Board of Trade of Metropolitan Montreal.Montreal tourism has the wind in its sails, and this includes income per hotel room.Again between January and October 2000, this income rose by 8.8% over the same period the previous year, while it rose by just 3.3% in all of Canada (+3.3% in Toronto and -5.5% in Vancouver.) Notably, the price of hotel rooms rose more quickly in town than in the suburbs of Montreal.REAL ESTATE NO RECESSION FOR HOUSING STARTS January was a particularly good month for housing starts.Throughout Canada, there was a 20% increase over December, but some cities really went to town: housing starts were up 28% in Toronto, 123% in Vancouver, and 21% in Montreal.In January 2001, Canada posted a high not seen since June 1994.All provinces recorded increases with the exception of Newfoundland and Prince Edward Island. 13 Montreal reported 539 new residential building sites in January, 47 more than during the same period last year.In annual variation, the increase was 9% in Montreal, compared to 48% in Toronto and 116% in Vancouver.Much more significant is the annual average for each of the three cities: without breaking the bank, Montreal did reasonably well at 2.9%, while Toronto continued its vigorous advance at 10.5% and Vancouver lost ground with a 6% decrease.It seems the real estate sector is indeed a lagging economic indictor: at the start of an economic downturn, this sector continues to thrive, beginning its slowdown when other sectors have already begun to rebound.In Montreal, condos continue to sprout like mad (+24% in January), and single-family dwellings are also making a good showing (+10%), while the rental market is losing face (-49%).Geographically, we note that Laval and the North Shore are still very active (+17%); the Island of Montreal is going even stronger (+20%); but the South Shore has hit the doldrums (-34%).Units Housing starts Seasonally adjusted data 60.000 40,000 20,000 Montreal Toronto Vancouver Source: CMHC 60,000 50.000 40.000 30.000 20.000 10,000 0 RESALES: EVEN BETTER THAN EXPECTED For once, it appears that forecasts were unnecessarily gloomy with regard to the resale market.Just one year ago, the Canadian Mortgage and Housing Corporation predicted that this market would not move an inch in Montreal in 2000.After a whole string of upward revisions, real estate transactions were definitely up by 5.8% last year.After the 10.6% increase in 1999, this was not bad at all.After this whirlwind of activity, the CHMC believes the market will finally settle down this year: a 1.9% downturn is predicted.In spite of everything, notes Paul Cardinal, of CHMC, \u201caffordable borrowing costs, increases in disposable income, and a shortage of vacant rental housing units in Greater Montreal all favour the promotion of home ownership.\u201d Elsewhere in the country, optimism is guarded, depending on the geographical region.Toronto should continue to break records, however, if the concept still means anything at all to Canada\u2019s largest city: an increase of 2.8% and sales of 60,000 units are predicted, compared to 29,000 for Montreal.After a sharp 7.1% drop in 2000 (with a parallel drop in housing starts), sales in Vancouver should bounce back by a healthy 7.8% this year.Less vulnerable than cities in eastern Canada to the economic woes of our neighbour to the south, the largest city on Canada\u2019s Pacific coast has recent- Resale market Annual variation rates 75.000 65.000 55.000 45.000 35.000 25.000 15.000 5,000 -5,000 Montreal\tToronto Vancouver Calgary 15.4 ,7 ! 7.8 1-7 -1.8 -0.6 Source and forecasts*: CMHC 14 ly engineered a shift in trading partners, moving away from Japan and more toward Europe and Southeast Asia.Finally, sales in Calgary should continue to decline this year (-0.6%) as a result of declining interprovincial migration: with neighbouring provinces faring better these days, they are in a better position to retain their residents.NON-RESIDENTIAL REAL ESTATE: RECORDS BROKEN IN MONTREAL Whether in terms of commercial or industrial real estate, Montreal wound up the last decade in fine form: the vacancy rate for office space was 9.8% at year end, while that for industrial property slipped to just 4.7%.In both cases, figures this low haven\u2019t been seen for at least ten years.In the case of industrial property, illustrated here, brisk land sales pushed prices up, largely due to strong demand in the aerospace and pharmaceutical sectors.Royal LePage expects vacancy rates will continue to fall in 2001.Contrary to what happened in Toronto and Vancouver in the last six months of 2000, the shakeup in the technology sector had little effect on real estate activities in Montreal.A case in point, the absorption rate for class A office space in downtown Montreal was up 17% over the first half of 2000.It is very likely, however, that the downturn in the technology sector will lead to a slight slowdown in activity in this sector during the first quarter of 2001.Nevertheless the robustness of the communications, biotechnology, and computer equipment sectors, together with the general scarcity of construction projects, should shore up the entire market in 2001.Industrial property vacancy rates Source: Royal LePage 2T97 3T97 4T97 2T98 3T98 4T98 1T99 2T99 3T99 4J99MT00 2T00 3T00 4T00 Montreal mm Toronto ¦¦¦ Vancouver ml Canada ¦¦¦ Montreal\u2019s West Island is still the sector of choice for most real estate promoters and renters.But as the supply dries up, the value of land should continue to rise as vacancy rates fall. 15 RETAIL MARKET CONSUMER SPENDING: GREY SKIES AHEAD Although retail sales grew by 0.4% in November 2000 in Canada, the situation is nevertheless still dicey in the early months of 2001.Judging by the latest Conference Board surveys of consumer attitudes in Canada and the U.S., retail sales are simply enjoying a reprieve.In January, the U.S.index fell to its lowest level since December 1996, while in Canada it slid by 3.4% between the third and fourth quarters last year.And since consumption represents approximately two-thirds of the GDP, there is reason for caution concerning the immediate future.Along with the Yukon and the Northwest Territories, Quebec was the only province to post a decline in consumption last November, the most recent month for which figures are available.In recent months, overall sales in Quebec stores have dropped slightly, although they recorded strong growth in June and July.During the first half of 2000, sales were erratic, although they generally followed an upward trend over an eighteen-month period.In Ontario, on the other hand, despite the slowdowns observed in October and November last year, sales have generally been climbing since 1996.Retail sales Seasonnally adjusted data Source: Statistics Canada Nov.-97 Nov.-OO Montreal Ontario 25 20 15 10 5 0 -5 -10 As for Montreal, retail sales here have mirrored those in Quebec as a whole, though on the low side since August.Aside from September, every month since then has seen a decrease in retail sales.If job creation does not soon pick up in Montreal, there is reason to fear that consumer spending could drop even further in the coming months.FINANCIAL SECTOR THE NFB QUEBEC INDEX PULLS AHEAD After suffering heavy losses last fall, the NBF Quebec index has begun to rally once again.In fact, compared to other small-cap stock indexes, Quebec\u2019s index has been doing quite well, especially in recent months.In January, the NBF index rose 6.5%, compared to 1.14% for the TSE 200 and 5.13% for the American Russell 2000.\u201cOur index likely benefited from the \u2018January effect,\u201d\u2019 admits Martin Goulet, financial analyst at the National Bank Financial.\u201cSmall-cap stocks often do well at the start of the year.Why?Because after the heavy selling in November and December for tax reasons, these stocks look Small-cap stock index i W A®' A* W A0 W A* A® tr ^ A®*' w A* A® 'W cf A® y NBF Quebec ¦¦¦ Russell 2000\tTSE200 Source: National Bank Financial 16 like bargains again in January.People start buying them, and their prices naturally rise.\u201d This January, the index\u2019s best performers were Aldea Vision (+150%), Royal Aviation (its 86% increase caused by Canada 3000\u2019s buyout proposal), and Exfo Electro-Optical Engineering (+84%).Its big losers were Solutions Saturn (-25%), Cable Satisfaction (-18%), and NHC Communications (-13%).Groupe Telescene Film and MDP Worldwide Entertainment were removed from the index.Astral Media and Groupe Jean Coutu were also removed because their capitalization became either too high or too low for the index.BOURSE DE MONTRÉAL: A GOOD YEAR Since the Montreal Exchange became the only Canadian stock exchange to negotiate derivative products on March 27, 2000, progress on this front has been steady.In fact, equity options trading increased by 237% last year after growing by just 4.7% the previous year.Moreover, this increase was the result of trading in several derivative products: these include the S&P Canada 60 index futures contract (SXF), which increased by 57% in 2000, hitting numerous peaks throughout the year, and the Option on Three-Month Canadian Bankers\u2019 Acceptance Futures (OBX), which increased by 48% during the year.Ten-Year Government of Canada Bond Futures, on the other hand, were down 6% as compared with 1999.Likewise, the Three-Month Canadian Bankers\u2019 Acceptance Futures (BAX) ended the year down 17% over the previous year.On December 31, 2000, Bourse de Montréal had a total listing of 128 companies, representing 136 issues.Its market capitalization was $1.1 billion.The Toronto Stock Exchange (TSE) had 1,421 companies listed (1,708 issues), with capitalization of $1,433.9 billion.And the Canadian Venture Exchange (CDNX) had 2,598 companies listed (2,696 issues) with market capitalization of $107 billion.Note that following the restructuring of Canadian stock markets, Montreal transferred its large capitalization stocks to Toronto and its small-cap stocks to CDNX, thereby reducing its capitalization somewhat.Growth of Montreal Exchange Option Trading 1995 - 2000* 5,500,000 4,500,000 3,500,000 2, 500,000 +35.2% 1, 500,000 +30.9% 500,000 \u2022500,000 Sources: Montreal Exchange, TSE, CDNX * Excluding LEAPS, long-term stock options 17 SPECIFIC ECONOMIC SECTORS MONTRÉAL : THE STRONGEST GROWTH IN INTERNET USE Between 1997 and 1999, the percentage increase of Internet penetration was higher in Montreal (60.7%) than in Canadian cities.In 1999, it was 39.1% in Montreal, compared to 48.5% in Toronto, 56.4% in Vancouver, and 60.7% in Ottawa.Only one Montreal household in four uses the Internet, one of the lowest rates in Canada.In fact, the provinces of Quebec (33.1%) and Newfoundland (35.1%) trail behind the rest of the country in this regard.In general, the richest provinces (Alberta, British Columbia, and Ontario) have the highest Internet penetration rates.Moreover, households with high income and education levels and young members tend to spend the most time in cyberspace.variety of reasons.And once households are connected, they tend to stay that way.Only 1.9% of households have \u201cabandoned\u201d the Internet, and an even smaller percentage (0.7%) have dropped it after making regular use of it.The Internet is becoming an integral part of the life of more and more Canadians.any other CMA in Canada.On the other hand, the penetration rate is relatively lower here than in other major * Internet penetration rate Regular users, wherever it used ¦ Montreal Canada Toronto Vancouver Calgary Ottawa 1997 j2***|^ Members of households using the Internet at home did Source: Statistics Canada so more often, for longer periods of time, and for a greater 1999 ~-a 18 I QUALITY OF LIFE TUITION FEES: THE LOWEST IN CANADA Quebec undergraduates have little to complain about when it comes to tuition.Quebec universities boast the lowest fees in Canada - at least for Quebec residents.Unlike other provinces, Quebec charges more for non-residents than for residents: in fact the price doubles for out-of-province students.On the other hand, some Canadian provinces charge different rates depending on whether students are majoring in arts or sciences.Such is the case at the University of Manitoba, for example, where it is deemed fair to charge higher fees to students with greater earning prospects.In all Canadian provinces except Quebec and B.C., tuition fees have more than doubled since the early 1990s.This year, Newfoundland and Prince Edward Island joined these two dissenting provinces by freezing their tuition fees, which are nevertheless much higher.Elsewhere in Canada, it is a different story: Manitoba reduced its fees by 10%, while Nova Scotia raised its fees by 7.5%.Yet this is all just loose change compared to the fees charged by the big U.S.colleges.At Harvard, students pay Cdn$50,761 for tuition plus room and board.Compared to that, the $37,719 charged by UCLA (University of California, Los Angeles) is a real bargain.Tuition fees Undergraduates University\tTuition fees\tOther compulsory fees\tTotal Laval (Quebec students!\t$1,668\t$162\t$1,830 Montreal (Quebec students!\t$1,839\t$217\t$2,056 Concordia (Quebec students)\t$1,668\t$582\t$2,250 Simon Fraser (B.C.)\t$2,310\t$207\t$2,517 McGill (Quebec students)\t$1,668\t$1,133\t$2,801 Montreal (non-residents)\t$3,609\t$217\t$3,826 Calgary\t$3,834\t$214\t$4,048 Ottawa\t$4,174\t$144\t$4,318 Toronto\t$3,951\t$719\t$4,670 McGill (non-residents!\t$3,708\t$1,133\t$4,841 Acadia\t$5,805\t$147\t$5,952 Source: Macciean's 19 CANADA ECONOMIC DEVELOPMENT REPORT IS MONTREAL\u2019S ECONOMY IN BETTER SHAPE THAN IT WAS IN 1990?SLIGHT IMPROVEMENT IN INDICATORS.Between 1990 and 1999, the employment rate increased by only 0.5 of a percentage point whereas the average for all North American major cities was 1.4 points.The unemployment rate dropped further, by almost 2 percentage points, but unemployment for Montreal remains higher than for all the other cities on the list.Based on the indicators, Montreal's economic health did not improved very much, and it lagged even further behind its North American neighbours.THAT CONCEALS AN INTENSE RESTRUCTURING AND RECOVERY In 1990, Quebec firms were about to face a recession, the introduction of free trade in North America, privatization (Canadian National and Air Canada) and deregulation of transportation and communications, at the same time as the tax burden for consumers was increasing and interest rates were rising.Montreal has since begun to benefit from this restructur- Employment rate2 in 1990 and 1999\t\t\t\tUnemployment rate in 1990 and 1999\t\t Metropolitan\t1999\t1990\tVar.\tMetropolitan\t1999\t1990 area1\t(%)\t\t(PP\u2019I\tarea\t(%)\t(7.) Minneapolis\t76.7\t72.7\t4.0\tMinneapolis\t2.0\t4.2 Denver\t74.4\t70.0\t4.4\tDenver\t2.5\t4.6 Dallas\t74.2\t71.7\t2.5\tTampa\t2.8\t4.9 Seattle\t70.4\t66.9\t3.5\tBoston\t2.9\t5.9 Washington\t69.6\t70.3\t-0.7\tPhoenix\t2.9\t4.6 Atlanta\t69.5\t69.3\t0.2\tAtlanta\t3.1\t5.0 Houston\t68.9\t69.1\t-0.2\tDallas\t3.1\t5.2 San Francisco\t68.9\t66.6\t2.3\tWashington\t3.1\t3.9 Chicago\t67.3\t64.8\t2.5\tSan Diego\t3.2\t4.7 St.Louis\t66.8\t63.5\t3.3\tSan Francisco\t3.2\t3.9 Boston\t66.7\t64.4\t2.3\tDetroit\t3.4\t7.6 Phoenix\t66.7\t65.3\t1.4\tSt.Louis\t3.4\t6.0 Tampa\t65.5\t57.3\t8.2\tSeattle\t3.7\t3.8 San Diego\t64.3\t62.0\t2.3\tChicago\t4.0\t6.0 Los Angeles\t63.9\t63.5\t0.4\tPittsburgh\t4.2\t5.1 Toronto\t63.7\t68.3\t-4.6\tPhiladelphia\t4.3\t5.2 Detroit\t63.5\t59.6\t3.9\tCleveland\t4.4\t5.3 Cleveland\t63.2\t60.7\t2.5\tHouston\t4.7\t5.1 Philadelphia\t63.2\t61.4\t1.8\tNew York\t4.8\t5.3 Vancouver\t60.9\t63.8\t-2.9\tLos Angeles\t5.1\t5.5 New York\t60.7\t60.3\t0.4\tMiami\t5.3\t6.9 Montreal\t59.7\t59.2\t0.5\tToronto\t6.1\t5.2 Pittsburgh\t59.6\t54.7\t4.9\tVancouver\t7.8\t7.3 Miami\t59.3\t61.6\t-2.3\tMontreal\t8.6\t10.5 1.\tMetropolitan areas (MSA) and consolidated metropolitan areas (CMSA) in the United States.2.\tUS data estimated by author.3.\tPercentage points.ing: sustained expansion, stimulated by exports and private investment as inflation and interest rates declined and public finances were balanced.THE MIX OF PRODUCTS SOLD BY MONTREAL HAS IMPROVED In 2001, Montreal is in the enviable position of being dominant in world production of two commodities whose demand should increase steadily for at least five years.With the launch of its Regional Jet in 1993, Bombardier became the main producer of regional aircraft.The development of high-speed fibre optics networks in 1997 made it possible for Nortel Networks to dominate the fibre optics distribution market.Production of these two commodities, which are Montreal's main exports, will continue to grow, even if the economy slows down.Sources: Bureau of Labor Statistics (LAUS) and Statistics Canada (LFS) Manufacturing Shipments1 Billions 1992 $ annualized and seasonally adjusted 1992\t1 993\t1 994\t1 995\t1996\t1997\t1 998\t1 999\t2000 Telecommunications equipment (SIC 3351 and 3359) mm Aircraft and parts ¦¦¦¦ 1.Quebec shipments for major Montreal industries Source: Statistics Canada A MORE OPEN AND PRODUCTIVE ECONOMY 20 The opening up of the economy to competition has toughened Montreal firms.The best illustration of this turnaround is Canadian National.After becoming privatized and having to face a deregulated universe, the Montreal company became the strongest railway transportation firm on the continent.Furthermore, since 1995, Montreal firms have embarked on a round of capitals projects and invested in new information technology, which should in the longer term make them even more productive.LARGE POOL OF YOUNG HIGHLY EDUCATED WORKERS Growth in knowledge-based activities has raised the level of qualifications required by the labour market.Combined with the small number of jobs on offer in the early 90s, it led young people (particularly those in the 20 to 24-year-old age group) to return to their studies to raise their qualifications.The rate of attendance at educational institutions in Montreal is one of the highest in Canada.According to a statistical compilation prepared by McGill University, the number of university students per capita is higher in Montreal than in any other North American city.RESTRUCTURING HAS NOT ENDED Restructuring is still part of the Montreal economic landscape.Since 1993, employment growth, which has been steady in Toronto, has been volatile in Montreal: -\tstreamlining of transportation and communication firms in the summer of 1996 -\tadjustments to major air and rail transportation companies and head offices of natural resource producers early in 1999 -\tfurther decline in clothing industry in the year 2000.In other words, clothing manufacturers are losing an increasingly large share of the Canadian market to exports from Third World countries, a process which will culminate in January 2005 when the remaining half of import quotas are eliminated.THE TAX BURDEN HANDICAP The tax burden is the highest in North America.The elimination of government deficits has only begun to have an impact on lower taxes.The gap between Montreal and other major North American cities has clearly grown even wider.SOME CATCHING-UP REMAINS From many standpoints, the Montreal economy is in better shape to cope with cyclical ups and downs.However, it had a long way to go and has not yet become as prosperous as other major North American cities.Level of education2\t\tUniversity attendance3\t in 1990\t\tin 1996\t Metropolitan\tShare of bacc.2\tMetropolitan\tShare of univ.area1\t