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

[" RO UTAN REGION QUARTERLY PUBLICATION OF STATISTICAL ANALYSIS OF THE BOARD OF TRADE OF METROPOLITAN MONTREAL PRODUCED IN PARTNERSHIP WITH CANADA ECONOMIC DEVELOPMENT VOLUME 3, NO 4, JUNE 2001 HIGHLIGHTS CONDITIONS FAVOURABLE TO MONTREAL Although we had every reason to expect that, given current business conditions, news on the economic front would be bad, the latest statistics are categorical.In fact, Montreal is doing just fine.Whether we look at job creation since January, the real estate market, projected GDP growth, consumer spending, or even passenger traffic at Montreal airports, our economy is doing surprisingly well.This does not mean that Montreal is immune to North American economic conditions.On the contrary.As always, the prevailing winds could shift direction at any moment.We would of course be well advised to pay close attention to the major factors underlying our economy: significant assets such as the knowledge economy, but much work to be done in the age of globalization.MORE GOOD NEWS ¦\tHousehold spending went up ¦\tMontreal, a tourism hub ¦\tBourse de Montréal and market index in good shape THE SAME OLD PROBLEMS ¦\tPopulation growth is lagging ¦\tTaxation: the gap is not really shrinking THE CED REPORT To maintain its status as an international technology centre, Montreal must continue to support research and development.To get there, we will have to do the job in double quick time.Développement\tCanada Economic ¦ \u201d ¦ économique Canada Development Canada 2 North Belt Laval South Belt Montreal MAP of THE METROPOLITAN AREA ¦\tMontreal, Laval and North and South ¦\t111 municipalities ¦\tPopulation: 3.3 million ¦\t55% of Quebec\u2019s GDP 1.7 million jobs 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 UicHÜiéei 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 TABLE OF CONTENTS 3.\tMAIN FEATURES\t4 \u2022\tPublic libraries (quality of life)\t4 4.\tMACROECONOMICS\t4 The gross domestic product \u2022\tGDP of Canadian metropolitan areas\t4 Employment \u2022\tJob creation\t5 \u2022\tUnemployment rates\t5 \u2022\tHelp wanted index\t6 \u2022\tWork stoppages\t6 \u2022\tEmployment assistance\t7 \u2022\tUnionization\t7 Earnings and expenses \u2022\tHousehold spending\t8 Prices \u2022\tConsumer price index\t8 \u2022\tCost of electricity\t9 5.\tSECTORIAL ECONOMY\t10 Transportation \u2022\tAir traffic\t10 \u2022\tPort traffic\t10 Tourism \u2022 Hotel occupancy rate in Greater Montreal 11 Real Estate \u2022\tHousing starts\t11 \u2022\tResale market\t12 \u2022\tOffice vacancy rates\t12 Retail market \u2022\tSales\t13 Financial sector \u2022\tSmall-cap stocks\t13 \u2022\tMontreal Stock Exchange\t14 6.\tSPECIFIC ECONOMIC SECTORS 14 Personal income tax \u2022\tMarginal tax rates\t14 Population \u2022\tPopulation growth\t15 7.\tQUALITY OF LIFE\t16 Health \u2022\tTotal fertility rate\t16 8.\tCANADA ECONOMIC DEVELOPMENT\t17 \u2022\tMontreal, an international technology centre\t17 ' v V Economic Development 1^1 Canada Economic Développement 1^1 Development économique Canada Canada Going Farther, Faster Small Business Excellence 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.Chambre de commerce du Montréal métropolitain Board of Trade 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 HIGHLIGHT MUNICIPAL LIBRARIES: MONTREAL LAGS BEHIND Greater Montreal\u2019s municipal libraries are not rolling in money \u2014 especially those in the city of Montreal.In 1998, the last year for which figures are available, Montreal spent $25.41 per inhabitant on its libraries compared to $75.10 in Pointe-Claire and $74.35 in Côte-Saint-Luc.Montreal subsidized its libraries to the tune of $25.41 per inhabitant compared to $75.10 for Pointe-Claire and $74.35 for Côte-Saint-Luc.Not surprising, then, that Pointe-Claire libraries boasted 6.66 books per inhabitant and spent $85.17 per person, compared to 2.1 books and $27.40 per person in Montreal.Obviously, wealthy municipalities can afford to offer their citizens better library services than poorer ones.In theory, Bill 170 (calling for municipal restructuring \u2014 or the much-discussed mergers) should create a more level playing field.But there is no reason to expect that the integration of all libraries into a single network will solve all problems: the councils of the new administrative districts might very well prefer not to give up their prerogatives for the sake of an integrated library network in the new city.Toronto, on the other hand, did manage to amalgamate the libraries of seven constituent cities.Today, the new Toronto Public Library serves 2.4 million citizens and is one of the largest in the world.But as the following table illustrates, Montreal\u2019s libraries currently lag far behind those in the rest of Canada from every point of view.Canadian public librairies \tMontreal\tToronto\tVancouver\tCalgary\tCanada* Books per inhabitant\t2,67\t5,07\t4,07\t2,54\t2,8 Purchases per inhabitants\t0,1\t0,26\t0,32\t0,37\t0,25 Loans per inhabitant\t5,27\t11,28\t15,55\t13,44\t10,44 Total spending per inhabitant in $\t27,47\t51,43\t54,9\t29,2\t33,95 Spending per inh.$(purchases)\t2,38\t5,55\t6,64\t5,01\t4,42 Employees ** per 2000 inhabitants\t0,82\t1,58\t1,72\t0,97\t\" Source: Council of Administrators of Large Urban Public Librairies (CALUPL) Notes : * Cities of 50,000 inhabitants or more ** Full-time equivalent H LA MACROECONOMICS THE GROSS DOMESTIC PRODUCT PROJECTED GDPS: TORONTO STUMBLES THIS YEAR After a spectacular showing last year (+5.8%), Toronto\u2019s production will grow more slowly in 2001 (+2.7%), at least if Conference Board of Canada predictions are on the mark.Montreal\u2019s growth rate will also slow, but less dramatically than Toronto\u2019s: +3.3% compared to +4.3% last year.In 2002, the GDP (gross domestic product) of both cities should increase.\u201cThe slowdown is due primarily to the weakness of the automobile sector - mainly affecting Toronto - and the telecommunications market,\u201d notes Louis Thériault, head of metropolitan forecasts at the Ottawa-based economic research agency.\u201cBut the diversified economic base of both these cities should allow them to hold their own despite the American slowdown - a slowdown, moreover, that has been greatly exaggerated in the media.The United States has a solid economic base, reinforced in the past few years by massive investments in office equipment.\u201d Projected GDP growth for Canadian metropolitan areas %\tAnnual variation in % Montreal Vancouver Toronto ¦¦¦¦ Calgary Quebec City (CMA) ¦¦¦ Source: Conference Board of Canada The Conference Board of Canada further maintains that the economic growth predicted for major Canadian cities gives little credence to the wave of pessimism that has recently swept North America.In fact, according to this independent agency, the upsets caused by current economic conditions should be even less perceptible in the labour market. 5 UNEMPLOYMENT JOB CREATION: MONTREAL BACK IN THE SADDLE AGAIN Montreal\u2019s employment record has been excellent since late last year.By April 2001, 43,700 new jobs had been created since last December\u2019s decline.In Toronto, where employment is generally more sustained than in Montreal, only 36,700 jobs were created during this same period.Vancouver gained 13,600 jobs, but Calgary lost 5,200.Since February, Canada as a whole has seen the creation of 55,000 new jobs.These by and large healthy statistics contrast sharply with the experience of the U.S., where 280,000 jobs have been eliminated since February.What is most surprising about these figures is the performance of Montreal.While Canada was busy creating jobs all last year, Montreal was just as busy losing them (-63,000) - despite the fact that the rest of Quebec managed to create an astonishing 89,100 jobs in 2000.But the tables have been turned this year, with Quebec losing 24,000 jobs since January and its metropolis gaining 43,700.It is interesting to note that, unlike the rest of Quebec, the majority of jobs created in Montreal were in the manufacturing sector.Commerce and corporate services have also shown strong growth in recent months.Laval and the north and south belts are also making up for ground lost last December.The Island of Montreal, which has been dragging its heels for the past year, has been creating a steady stream of new jobs, especially since last October.Still, given the number of announced layoffs and the ever-present threat of another cold snap from the U.S., it would be surprising if Montreal were able to maintain its momentum throughout 2001.The help wanted index (see below) is another cause for concern.Job creation annual variation Deseasonalized data April 97 April 98 April 99 April 00 April 01 Montreal Vancouver Source: Statistics Canada Toronto THE UNEMPLOYMENT RATE SEEMS TO BE STUCK AROUND 8% IN MONTREAL Despite Montreal\u2019s excellent job creation record since early this year, our unemployment rate seems to be dug in at about 8%.An expanding labour force along with increased labour force participation are behind this phenomenon.In fact, total labour force expressed as a percentage of the population aged 15 years and over has jumped 150 basis points since December, a surprise considering the current economic situation.It\u2019s no surprise that Quebec\u2019s unemployment rate was 8.7% in April, given the limited number of jobs created in the province.Although the labour force has increased more slowly in the province than in its metropolis, unemployment has grown steadily in Quebec since last December (8%).In contrast, the lowering of Ontario\u2019s participation rate since the end of last year has benefited its unemployment rate, which remains around 6%.Unemployment rate deseasonalized .¦-¦'V ,6 14 12 0 P |6 4 I2 !o April 99 April 00\tApril 01 Source: Statistics Canada Montreal I Toronto I Calgary Vancouver I Labour force participation rates have also fallen in other major Canadian cities, as have their employment rates, which measure the proportion of people of labour force age who are actually working.Since February, Montreal\u2019s employment rate has risen slight- ly, a countercyclical phenomenon that goes hand in hand with what we said about job creation (see above).It remains to be seen how long Montreal will resist the North American current that is pulling employment down. 6 FEWER AND FEWER JOB OFFERS One thing is sure: the labour market is not booming.But when the job market will either begin to recover or show clear signs that it is in a slump is anyone\u2019s guess.Because the employment market has been sending us mixed signals for some time now.While the U.S.job market is no doubt struggling, the Canadian market is holding its own.In fact, the Canadian help wanted index stopped its free fall in April, after dropping steadily for five months.And the Alberta index was actually up 4% in April.Toronto, Vancouver, and Montreal, on the other hand, are still keeping a low profile.Yet job creation was up significantly in Montreal during the four first months, while it was much weaker in the rest of the country.These contradictory signals indicate hesitation about what direction employment will actually take in the coming months, although the job offer curve leads us to believe the situation will deteriorate in 2001.Remember that this index is considered a leading indicator of labour demand since it measures the intentions of employers to hire new workers.1996 = 100 Help wanted index Smoothed, seasonally adjusted data Source: Statistics Canada Montreal Toronto Calgary Vancouver l STRIKES AND LOCKOUTS: VANCOUVER MAKES UP FOR LOST TIME Last year, Vancouver had more strikes and lockouts than it has had in one year since we began compiling statistics on this subject.In fact, it experienced 12 work stoppages resulting in the loss of 252,105 person-days.In comparison, Montreal experienced 30 work stoppages, resulting in the loss of 136,230 person days.Toronto followed the example set by Vancouver, chalking up a record 49 work stoppages, resulting in the loss of an amazing 352,890 person-days.Other than the labour disputes at the Société de la Place des Arts and the Port of Montreal, Montreal had few major work stoppages.Elsewhere in Quebec, disputes at Goodyear, Westroc, Quali-T-Galv, Alimentation Picard, Super C, and the town of Sainte-Foy attracted attention.Aside from York University, in Toronto, there were few strikes worth mentioning in Canada\u2019s metropolis.On the other hand, the Falconbridge mine in Sudbury outdid itself, with total person-days lost representing more than a third of those lost in Ontario.Elsewhere in the province, EB Eddy Forest Products, SteelWire, and the Hamilton-Wentworth school board stand out.Work stoppages Companies in all categories 350,000 300,000 250,000 200,000 150,000 100,000 Source: Human Resources Development Canada Montreal Toronto Vancouver I Finally, aside from Superior Poultry in Coquitlam, British Columbia\u2019s major labour disputes occurred in Vancouver: notably city employees and Premium Brands (Fletcher\u2019s). 7 EMPLOYMENT ASSISTANCE: CONTINUED IMPROVEMENT While economic growth does not benefit all citizens in equal proportions, it is nevertheless beneficial to society as a whole.This is borne out by recent statistics concerning recipients of employment assistance.As the current economic up cycle has progressed, the number of welfare recipients has declined.Not surprisingly, as more jobs were created, the number of unemployed went down.And fewer unemployed means fewer destitute people in need of assistance.Greater Montreal, the poverty capital of Quebec, has also benefited from the generalized prosperity.In the city of Montreal alone, the number of employment assistance recipients fell 4.8% between 1999 and 2000.If we go back as far as 1996, a very difficult year for the poor, the decrease is even more striking: almost 23%.However, the absolute number of recipients is higher in Montreal than elsewhere in the metropolitan area, and it fell more slowly: in Laval, for example, it fell 30% during this same period.This positive trend could change, however, if the current economic slowdown should spread throughout North America.It takes up to four quarters for the recipients of social assistance to feel the impact of changing business conditions.So if economic and employment growth did indeed peak last year, we will not begin to feel the painful effects until year-end.Employment assistance recipients 800,000 700.000 600.000 500.000 400.000 300.000 200.000 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 All of Quebec Greater Montreal Source: Ministère de la Solidarité sociale Greater Montreal: Montreal Island, Laval, Montérégie, Laurentians, Lanaudière.UNIONIZATION: MONTREAL MAINTAINS ITS LEAD At 32.2%, Montreal\u2019s unionization rate was the highest of all major Canadian centers in 2000.But, at 31.6%, Vancouver was not far behind.In fact the rates for the two cities have been closely intertwined for some time now.Since our series began in 1997, Montreal and Vancouver have been in a close race for first place.This mirrors the behavior of Quebec and British Columbia, which have also taken turns leading the pack since 1976.Although union activities in Ontario sometimes result in prolonged work stoppages (see our graph on this subject), that province - and especially its capital city - have unionization rates far below the national average.Last year, 21.4% of Toronto employees were unionized.But it is in Alberta that unions are least successful: in Calgary, the rate was 18.7% - just half what it was in Quebec.Unionization rates Montreal ¦¦¦\tCalgary ¦¦¦ Toronto ¦¦¦\tCanada ¦¦¦ Vancouver ¦¦¦¦\t Source: Statistics Canada 8 EARNINGS AND EXPENSES HOUSEHOLD SPENDING: MONTREAL BOUNCES BACK In 1999, total spending by Montreal households jumped almost 12 percent over the previous year - a surprising turn of events, considering the Canadian average was up just 4.4% and the previous year\u2019s increase was only 1.8% .Equally surprising were Toronto\u2019s 8.8% surge, compared to 0.9% in 1998, and Quebec City\u2019s +5.3% rebound, compared to -6.5% in 1998.On the whole, however, these increases were justified by economic conditions in 1999.While spending on shelter remained virtually unchanged in Canada from 1998, estimated household spending on transportation, food, and personal taxes was up.As usual, the consumer spending patterns of Montrealers and Quebecers differed slightly from those of other Canadians.We devoted 12.5% of our budget to food (11% in Canada), for example, 18% to housing (19%), 11.5% to transportation (13%), 1.1% to charitable giving (3%), 6.3% to insurance (5.3%), and 24.5% to personal taxes (22%).These figures do not include sales tax, although it is well known that Quebec\u2019s value added tax represents the most exhaustive tax bite on consumption of any Canadian province.Among the seventeen metropolitan areas for which data is available, Yellowknife boasts the highest average spending per house- Average expenditure per Canadian household (1999) Percentage change between 1998 and 1999 60,000 20,000 40,000 Source: Statistics Canada hold ($93,830), followed by Toronto ($65,810) and Calgary ($65,010).Aside from Yellowknife, where all spending categories are inflated, Toronto\u2019s spending on shelter and Calgary\u2019s spending on entertainment and education account for considerably larger slices of household budgets than anywhere else in Canada.PRICES INFLATION UNDER CONTROL Any uneasiness surrounding inflationary trends at year end has now been allayed: this was confirmed by the March review of prices in both Canada and the U.S.and corroborated indirectly by the recent lowering of the U.S.Federal Reserve Bank\u2019s leading rate.The entire consumer price index has been down on both sides of the border since early this year, but even more significant is the decrease in the index excluding food and energy.These two elements are more unstable and difficult to predict than others since they respond to somewhat random external events.For example, the cost of food rose last winter as a result of poor weather in the southern United States; and the cost of oil and natural gas has undergone exceptional peaks since January that have been extremely prejudicial to the index.The indexes for Montreal, Toronto, and - especially - Vancouver all seem to be on a downward slope.Surprisingly, the annual variation was only 1.1% for Vancouver, compared to 2.6% for Montreal and 3.4% for Toronto: energy, shelter, transportation, and clothing were all down in the west-coast city in March.In Montreal, on the other hand, only transportation was down, while the cost of food rose more sharply here than in the country as a whole.Inflation Consumer price index March 97 March 98 March 99 March 00 March 01 Source: Statistic Canada,\tToronto\tU.S.A 111 § Bureau of Labour Statistics\t[Vancouver \u2014 Montreal \u2014 THE COST OF ELECTRICITY IN MONTREAL: ONE OF THE LOWEST 9 Whatever their level of electricity consumption, Hydro-Québec\u2019s residential customers are among the most fortunate in North America.As of May 1, 2000, in a comparison of 21 North American centers, their monthly bill was one of the lowest four.Based on monthly consumption of 1,000 kWh, Montreal was in second place after Winnipeg.Based on monthly consumption of 625 kWh, on the other hand, Montreal dropped back into fourth place, behind Seattle, Vancouver, and Winnipeg.Between 1999 and 2000, rates changed very little in Canada, except for Toronto, where monthly bills fell by 10.9%.In the United States, on the other hand, prices tended to rise - except for Miami, where the cost of electricity fell.Despite sizable increases in energy costs over the last year, the price of natural gas in Quebec did not keep pace with hikes at the borders of Alberta, the source of our natural gas.As for the price of electricity, which jumped 46% in New England, it did not budge an inch here, since it has been frozen by the government at $2.79/kilowatt hour until April 2002.Remember that electricity represents 41% of energy consumption in Quebec, compared to 20% in the rest of Canada.As for natural gas, the figures are 16% in Quebec, compared to 37% elsewhere.In Quebec, 97% of the electricity and natural gas is distributed by Hydro-Québec and Gaz Métropolitain, respectively, the other 3% by private and municipal networks (electricity) and Gaz-ifère de Hull (gas).Monthly electricity bills Rates in effect May 1,2000 (1000 kWh) Source: Hydro-Québec\t^ * These estimates by Hydro-Québec may differ slightly from actual bills.HH1 ///// ?\t4? 10 SECTORIAL ECONOMY TRANSPORTATION SIGNIFICANT INCREASE IN MONTREAL\u2019S AIR TRAFFIC Compared to the same period last year, air traffic at Montreal airports was up significantly in the first quarter of 2001, according to statistics provided by Aéroports de Montréal (ADM).With five times more traffic, Dorval saw a slightly greater increase than Mirabel.In 2000, on the other hand, air traffic grew by 10.2% at Mirabel, compared to just 2.3% at Dorval.The annual growth for both airports was 3.5%.This was down from the city\u2019s excellent performance in 1999, when ADM reported an increase in the total number of outgoing and incoming passengers of 5.2%.Moreover, the Air Transport Association of Canada (ATAC) reports that in January 2001, the number of passengers arriving in Montreal was down 1.4% from the previous year.This compares to increases of 10% in Toronto, 11% in Ottawa, 4.4% in Vancouver, 0.5% in Calgary, and 6.8% for the whole of Canada.Finally, data released by Airports Council International, a not-for-profit international association based in Geneva, reveals that Montreal\u2019s airports made some progress between 1997 and 2000.ADM rose from 95th to 91st place on the world stage, with Dorval jumping from 118th to 106th place and Mirabel slipping from 228th Total passengers at Montreal airports %\tAnnual growth rates\t% Six-month moving average Source: Aéroports de Montréal to 295th.On the other hand, both Toronto (27th place) and Vancouver (58th) lost ground.The busiest airport in the world is Atlanta (80 million passengers), compared to 9.9 million in Montreal.THE PORT OF MONTREAL: NO GROWTH IN 2000 It seems that marine container traffic left the Port of Montreal high and dry last year, with the port posting no growth over the previous year.You have to look back as far as 1995, when growth was negative (-0.7%), to find a similar situation.Traffic would no doubt have been up last year if not for the disappointing performance of two shipping lines.In fact, the bankruptcy of Bolt Canada Line and the cessation of business of Nora-sia Express Line, leading to the loss of a thousand tons of cargo, had a serious impact on the Port of Montreal\u2019s balance sheet.But the port took these blows in stride, attempting to reallocate the lost traffic to other lines doing business in Montreal.The truckers\u2019 strike last October also chipped away at the port\u2019s performance.Since 1994, the average annual growth rate of container traffic in Montreal has been 6.6%, compared to 6.9% for all ports on the eastern American seaboard.Not counting 1995, a very bad year for the Port of Montreal, the respective growth rates were 7.2% and 5.5%.All in all, the Port of Montreal has done very well for itself in the last five years.But the economic slowdown now hitting North America is not expected to spare Montreal port traffic, if only because half our traf- North Atlantic marine container traffic U.S.ports north of North Carolina* and Port of Montreal In twenty foot equivalent units Source: Piers Port Horizons, Port de Montreal Eastern American Seaboard Port of Montreal \u2022American ports included: Boston, New York, Delaware River, Baltimore, and Hampton Roads fie comes from the United States, which is once again suffering the consequences of an overvalued dollar. 11 TOURISM TOURISM: MONTREAL ON THE MOVE AGAIN While it\u2019s true that hotel occupancy rates in Greater Montreal were down in April, the year has nevertheless gotten off to an excellent start.Occupancy during the first four months of 2001 was, on average, higher than during the same period last year.Unlike other Canadian destinations, Montreal has not been deluged with an excess supply of rooms.In Vancouver, for example, occupancy of airport hotels was down 17.5%: over the past three years, the number of rooms in these hotels has grown by 65%.Of course Montreal is not the only city doing well in this regard.Last year, Toronto\u2019s market grew by 6.9% and Ottawa\u2019s by 9.4%.In contrast, Montreal posted only a 4% gain.Still, Colliers International, which has maintained a growth index for the hotel industry for the past twelve years, predicts that hotel occupancy this year will be up 8.5% in downtown Montreal and 7.8% around Dorval airport.Hotel occupancy rates in Greater Montreal seasonally adjusted data* 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Hotel Association of Greater Montreal * Deseasonalized by the board of Trade of Greater Montreal Moving 6-month average Yet not a week goes by without one expert or another predicting that tourism will be down this year.Recently Travel Agent and the National Business Travel Association (NBTA) in the United States both reported that the economic slowdown would inevitably take its toll on the hotel industry.As with weather forecasters, sooner or later they will turn out to be correct.And finally, the Chicago Convention and Tourism bureau ranked Montreal 11th out of a total of 79 North American cities for the number of available hotel rooms in the downtown core last December.REAL ESTATE BUILDING SITES STILL ACTIVE Despite a subdued business environment, the real estate market is still surprisingly strong.This was confirmed in April, when housing starts in Montreal jumped 33.6% over the previous year and 9.2% over the previous month.Vancouver, which launched a tentative recovery last year, seems to be making good on its promise, since it too was up 3% and 28.4% respectively.Toronto, on the other hand, is feeling the impact of the economic slowdown in the U.S., which has affected its real estate market to the tune of 8.1% and 8.5% respectively.Since the beginning of this year, Greater Montreal housing starts have been up 15.7% over the same period last year.The gradual absorption of properties for sale and rental housing seems to be the major factor contributing to the growing number of housing starts.In April, all products and all geographic sectors benefited from this increased demand.Elsewhere in Quebec, it was a different story, with a significant decline in centers with over 10,000 inhabitants.It is interesting to contrast the housing start profiles of major Canadian cities.As the graph below clearly illustrates, Toronto has been going its own way since mid-1998, when housing starts sagged in Vancouver.At the same time, Montreal overtook Vancouver, without ever approaching the number achieved in the Units Housing starts Seasonally adjusted, annualized data 60,000 40.000 30,000 20,000 Source: CMHC Montreal i Toronto ; ' Vancouver Queen City.At the provincial level, Ontario - with some 75,000 housing starts each year - boasts three times the number in Quebec, which just manages to tie Alberta - a province with less than half the number of inhabitants. 12 RESALES: BETTER AND BETTER At one time, it was expected that Montreal\u2019s resale market would be down this year, but apparently that is not the case.In fact the Canadian Mortgage and Housing Corporation (CMHC) now predicts a 4.9% increase for 2001.The shortage of vacant rental housing units, falling mortgage rates, and the refusal of consumers to be discouraged by the gloomy economic news all help to explain their growing enthusiasm for home ownership.In Toronto, the voracious appetite of homebuyers seems to have been somewhat sated: housing prices have fallen slightly, although this may be due in part to increased supply.In addition, job creation has slowed recently, engendering a spirit of greater moderation.Vancouver did not fare well on the housing front last year but, while economic conditions in no way justify such an increase, its resale market is expected to rise in 2001.It\u2019s true that the prospect of a liberal government has led to a wave of optimism on Canada\u2019s west coast.The CMHC predicts a 10.3% increase this year followed by an additional 3.1% in 2002.In the wake of a steady decline over the past few years, the Calgary market is now relatively stable.Resale market Annual variation rates 75.000 65.000 55.000 45.000 35.000 25.000 15.000 5,000 -5,000 0.6 Jill 15.4 _71 10.3 Montreal Toronto Vancouver Calgary Source and forecasts*: CMHC VACANCY RATES: UP EVERYWHERE BUT MONTREAL After dropping steadily for at least four years, office space vacancy rates are up across the country, except in a few cities, such as Montreal, where the rate has not changed.The effects of the economic slowdown, particularly in the dot.com sector, are beginning to be felt in the commercial real estate sector.For the moment, at least, Montreal seems to be immune from the disappearance of dot.coms.Thanks in part to the telecommunications and biotechnology sectors, rentals remained brisk in early 2001, while giving out a few signals that this could change.In fact there is still a dearth of office space in today\u2019s still-promising business environment, and the price of land and leases should continue to rise throughout the year.Cities such as Ottawa, Toronto, and Vancouver, on the other hand, have all suffered to varying degrees from the meltdown of the high-tech sector.According to Royal Lepage, leases should become more affordable there as a result.Vacancy rates in the industrial sector continued to fall during the first quarter.While Montreal\u2019s rate dropped to an enviable 4.4%, it is still far from matching those in the following cities: Ottawa %\tOffice space vacancy rates Toronto 2T97.3T97 4T97 2T98 3T98 4T98 1T99 2T99 3T99 1T00 2T00 3T00 4T00 1T01 Source: Royal LePage Montreal Vancouver ¦¦¦¦ Canada ¦¦¦ (1.8%), Vancouver (2.8%), and Calgary (3%).But current economic conditions should throw some cold water on the unbridled euphoria of the last few years. 13 RETAIL MARKET CONSUMER SPENDING: MORE OR LESS STABLE Despite the slight dip in retail sales last February, Montreal consumers are not ready to throw in the towel.And based on a careful analysis of various other factors, there is no reason to think they will do so any time soon.For example, despite the disappointing performance of the new technologies sector, employment growth, while not startling, continues to show surprising resiliency given the current economic situation.Real estate should benefit from the easing of interest rates and the increase in personal disposable income.And motor vehicle sales (which represent 25 percent of retail trade) should be up in March, according to preliminary data.In short, consumers have refused to be demoralized by stock market upsets and newspaper headlines trumpeting the slowdown in the U.S.economy.It is nevertheless true that the curve of annual variations in retail sales has been steadily downward for both Quebec (or Montreal) -since July 2000 - and Ontario - since August 1999.This trend has corresponded to the evolution of business conditions for some time now.Given the importance of consumption in the general eco- Retail sales Seasonally aujusieu uata Montreal Ontario Feb.97 Feb.98 Feb.99 Feb.00 Feb.01 Source: Statistics Canada * Deseasonalized by the Board of trade of Metropolitan Montreal nomic equation - two thirds of the GDP - there is good reason to believe that fears of a sharp economic decline are, for now, exaggerated.FINANCIAL SECTOR STOCK INDEXES: AN APRIL UPTURN After the massive setbacks incurred since last August, North American stock indexes began to rebound early this year.April, in particular, was a very good month, as evidenced by our own index, the NBF Quebec (+5.2%) and the TSE 200 (+7.4%).South of the border, the Nasdaq jumped 19% and the Willshire 5000 (the most exhaustive) 8.1% - the largest monthly gain it has posted since December 1991.While the small-cap indexes made less impressive gains than those tracking large corporations, this was partly because they had less ground to make up.When interest rates are low, as they have been recently, smaller companies hold the road very well.\u201cSince small companies depend more than others on bank indebtedness, lower interest rates give them some breathing room,\u2019 notes Martin Goulet, manager of the NBF Quebec index at National Bank Financial.\u201cAnd these lower rates could benefit our index for some time to come.\u201d The NBF Quebec index, with market capitalization of $12.5 billion in April, includes 100 companies with head offices in Quebec.It serves as a benchmark for many Quebec securities portfolio managers.Its performance has been no less than enviable since its base period of 1992.Since January, its star performers have been Royal Aviation (now Canada 3000), Shirmax, and Hartco (+75% or Small-cap stock indexes NBFQuebec m TSE 200 Russell 2000 Source: National Bank Financial more).NHC Communications, Saco Smartvision, and Saturn (Solutions), on the other hand, have chalked up heavy losses (-63% or more). 14 BOURSE DE MONTRÉAL: UPWARD AND ONWARD Based on the performance of the star product of the Bourse de Montréal since the restructuring of Canadian stock exchanges one year ago, i.e., stock options, business is apparently brisk at the former Montreal Exchange.During the first quarter, the volume of options traded was up 18.7% over 2000, already a very good year.Interest rate derivatives, on the other hand, seem to have fallen out of favour.Three-Month Canadian Bankers\u2019 Acceptance Futures (BAX) and Ten-Year Government of Canada Bond Futures (CGB), for example, have continued to lose ground since their zenith in 1998.Index derivatives have also been declining since last year.Our quarterly data have been annualized to facilitate this comparison.But if Bourse de Montréal is not winning on all fronts, it is not for lack of projects or energy.The Derivatives Institute - a new training and education center - was launched in April.After introducing single stock futures, the Bourse will do the same with futures contracts on sectorial indices as well as sponsered options: it is in line with the trend toward innovative derivative products.And while the stock exchange itself is only a shadow of its former Growth of Montreal Exchange Option Trading 1995 - 2001* 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 53.1,000,000 1995\t1996 Sources: Montreal Exchange * Excluding long term options |1) Annualized first quarter self, the Bourse de Montréal still maintains stock exchange services for Quebec-based small cap issuers who do not meet Toronto Stock Exchange listing requirements.SPECIFIC ECONOMIC SECTORS PERSONAL INCOME TAX TAXATION: RATES DROP, BUT GAP WIDENS Since 1997, when we began tracking this rate, the marginal tax rates at higher levels of income have dropped steadily in Quebec, falling from 52.9% to 48.7%.The problem is that since the same trend has been followed by other Canadian provinces and American states, Quebec has made no headway in shrinking the gap, which actually widened last year! Quebec\u2019s finance department estimates that the gap between Quebec and the other Canadian provinces rose from 2.1% in 2000 to 2.5% this year.If all goes as planned, however, this gap should shrink to 2.1 % again next year.Alberta\u2019s marginal tax rate fell from 43.7% last year to 39% this year, just slightly under the lowest rate found in the United States, or 39.6%.This rate, found for example in the states of Washing ton, Florida, and Texas, is the minimum federal tax.In addition, Alberta\u2019s sales tax is just 7% - a tad higher than that found in the state of Washington, on its southern border.British Columbia, on the other hand, taxes upper income levels at the same rate as Quebec, and its combined sales tax (7% GST + 8% PST) is close to that of Quebec (15.025%).There is one difference, however: Quebec\u2019s provincial sales tax is more exhaustive than those of either British Columbia or Ontario.And that can sometimes make all the difference! 15 Marginal tax rate (2001) Maximum rates as % of taxable income Seattle San Francisco Phoenix Philadelphia New York Miam Detroi Dallas Chicago Boston Atlanta Calgary Vancouver Toronto Montreal 3 42.6 15.03 10 20\t30 40 50\t60 Sale tax (max.) Marginal rate Source: Ministère des Finances du Québec, Board of Trade of Metropolitan Montreal, in collaboration with Samson Bélair Deloitte & Touche.Note: The maximum marginal tax rate corresponds to the combined federal and provincial tax to which is added each additional dollar on the highest income.The impact of the federal measures and the measures of the other provinces announced as of March 23,2001, have been incorporated.POPULATION DEMOGRAPHICS: MONTREAL BELOW AVERAGE Although the population of Montreal\u2019s CMA totaled 3.5 million this year, its growth rate is still below the average of Canadian CMAs.In fact Montreal and the province of Quebec are both following the same negative trend: their relative share of Canada\u2019s population is declining.In 1961, Montreal\u2019s population represented 25% of the population of Canadian CMAs; forty years later, its share has shrunk to 18%.Toronto, meanwhile, has been gradually gaining ground, climbing from 22% to 25%.Vancouver and Calgary have also made gains, although on a smaller scale.As for Quebec, Statistics Canada predicts that its share of the Canadian population (25% in 1993) will fall to 21% by 2026.During this same period, Ontario is expected to grow from 37% to 41%.British Columbia and Alberta are following the same trend.All in all, it appears that the populations of provinces experiencing rapid economic growth are also growing faster than the Canadian average.The same phenomenon may also be observed in basically urban-centered regions, whose economies are growing faster than those in intermediate regions or rural areas neighbouring metropolitan regions: their populations are also growing at a faster rate.Population growth Source: Statistics Canada Note: Based on the 1996 census Montreal Toronto Vancouver Calgary 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 As usual, Montreal and Quebec continue to lose many of the immigrants they attract from outside Canada to provinces west of the Outaouais: unlike Ontario and Alberta, Quebec continues to lose residents to other provinces.In addition, natural growth (the excess of births over deaths) continues to slow in all parts of the country. 16 ¦ QUALITY OF LIFE HEALTH QUEBEC: AN UNFERTILE LAND Compared to women in major industrialized countries, Quebec women are not very fertile.The latest statistics (1998), just published by Statistics Canada, reveal another drop in Quebec\u2019s total fertility rate, with just 1.47 children per woman.Moreover, at 1.46, women in Laval and Montreal are slightly less fertile than their fellow Quebecers.In fact this has been the case since 1997, when the rate for the metropolis fell below that of the province.Of the major Canadian provinces, Ontario (1.53) is just slightly under the Canadian average (1.54).It is not surprising then that the reduction in the number of live births was smaller in Ontario (-0.3%) than in the country as a whole (-1.8%).In Quebec, on the other hand, there were 4.9% fewer live births in 1998 than in 1997.British Columbia, where the number of live births fell by 3.4%, posted one of the lowest fertility rates in Canada (1.45).There are two factors underlying the drop in Canada\u2019s birth rate: the aging of the baby boomers and the lower fertility rates among women under 30.This pattern is not consistent throughout the industrialized world, however.In the past few years, the fertility rate has risen in both the United States (2.07) and France (1.75).On the other hand, this rate continues to drop in Japan (1.38).And Spain still hopes Total fertility rate (1998) Rate .45 ¦pHQMpjP^PU^^J|VPgmRHpgP^p|U|H| ?/ / J / / / I?a> Number of children per woman Sources: Statistics Canada, Institut de la statistique du Québec, INED (Paris) that the storks will find their back to its shores in greater numbers, increasing the number of births - and perhaps even the fertility rate (1.16). ¦ CANADA ECONOMIC DEVELOPMENT REPORT MONTREAL, AN INTERNATIONAL TECHNOPOLE In the past few years, Montreal has developed a solid R&D infrastructure, enabling it to compete with other technopoles and take its place in the new value-added, technology-centred economy.In fact, according to the Quebec Council of Science and Technology, of the almost 2,575 enterprises active in research and development (R&D) in 1995 in Quebec, 1,786 of them (69.4%) were in Greater Montre-al(l).According to the Bank of Nova Scotia, metropolitan Montreal\u2019s average annual growth in high-tech jobs from 1996-2000 was over 9%, the strongest in the country.In comparison, Toronto\u2019s high-tech sector grew by 8% and Vancouver\u2019s by 7%.From 1990-2000, the number of high-tech jobs rose an average of 2.5% a year.In October 2000, PriceWaterhouseCoopers/E&B Data carried out a study that compared the leading sectors of major North American cities and corroborated Scotiabank\u2019s findings.According to this study, in terms of jobs per inhabitant, the Montreal CMA placed second in aerospace, third in biopharmaceuticals and fourth in information technology.Employment in these sectors now accounts for 10% of all jobs in the metropolitan area.THE IMPORTANCE OF RESEARCH CENTRES A number of firms in these sectors have established close links with university research centres who play key roles as incubators and help create a network of diverse skills.The formation of these networks of partners results from a concerted effort to re-orient the Montreal economy toward leading-edge sectors, as evidenced from the data compiled for this column.Many key sectors of the new economy in Montreal have been able to develop and post sustained growth thanks to the combined efforts of various levels of government, which have instituted some of the world=s most advantageous tax incentives in support of R&D.According to the Conference Board of Canada, the net costs of R&D for companies are lowest in Quebec.Solid proof of the effectiveness of these government actions can be seen in the fact that R&D spending in the Montreal CMA since 1998 totals approximately $2.3 billion, accounting for a quarter of total R&D spending in Canada.R&D AND TECHNOLOGY ACQUISITION \tGreater Montreal1\tProvince of Quebec\tGreater MTL / QC Number of companies active in the R&D sector (1995)\t1,786\t2,575\t69.4% Company R&D spending (1995)\t$1,943.1 M\t$2,172.1 M\t89.5% Company R&D spending per inhabitant (1995)\t$302\t$301\t$+1 Company R&D personnel (1995)\t18,813\t22,259\t84.5% Total number of Canadian patents obtained (1997-2000)\t508\t701\t72.5% Investment in machinery and equipment (1998)\t9.0 B\t14.2 B\t63.2% Proportion of SMEs (-200 employees) using the Internet (1999)\t36.4%\t43% 11 regions\t- 6.6 points % Total number of ISO-certified establisments (2000)\t1,851\t3,152\t58.1 % Share of fastgrowing manufacturing SMEs (gazelles)\t6.3%\t7.2%\t-0.9 point % 1.Greater Montreal : compilation of regions 06 (Montreal), 13 (Laval), 14 (Lanaudière), 15 (Laurentian) and 16 (Montérégle).Source: Rapport de conjoncture 2001- Pour des régions innovantes, Council of Science and Technology, March 2001. 18 More than 125 of the approximately 450 research centres in the Montreal area focus on biopharmaceuticals, at least 30 on information technology and around 25 on aerospace.The Government of Canada acknowledges the importance of federal research centres in supporting the competitiveness of the Montreal economy and enabling it to successfully meet the challenges of globalization.In recent decades, the Montreal CMA has benefited from the Government of Canada\u2019s plan to decentralize its research centres.The centres that have moved to Montreal include the Canadian Space Agency, the Industrial Materiels Institute (IMI) and the Biotechnology Research Centre (BRI) of the National Research Council of Canada (NRC).WHAT DOES THE FUTURE HOLD?Competition remains very strong in the new economy, especially in technology sectors.In order to remain among the major technopoles, Montreal will have to continue its innovative approaches which include sustained maintenance and improvement of its various research infrastructures, both public and private.It will also have to ensure the availability of specialized skills to meet the growing need in technology sectors, particularly in aerospace, biopharmaceuticals and information and communications technologies.The very recent creation of the Aerospace Manufacturing Technology Centre at the University of Montreal, thanks to a joint investment of $46.7 million from the NRC and Canada Economic Development, is a step in the right direction.These efforts must be maintained so as to reinforce the links between companies and university centres.This co-operation is essential to enabling the Montreal CMA to develop the skills it needs to consolidate and improve its position among innovative metropolitan areas.(1) Greater Montreal, which is defined in the note under the first table, is larger than the Montreal CMA, which is defined on Page 2 of the Trend Chart.By Louis-André Lussier, Economist With contributions from Jules Léger, Economic Advisor, Island of Montreal Canada Economic Development COST OF A $1001 R&D ELIGIBLE SALARY IN QUEBEC IN 2000 Manufacturing sector\t\t\t\t \tSME\t\tLarge Company\t Tax incentives / cost\tTax credit 40%\tTax credit 40%\tTax credit 20%\tTax credit 40% From Quebec2\t$26\t$39\t$17\t$40 Federal2\t$35\t$30\t$34\t$26 Net cost to company*\t$39\t$31\t$49\t$34 Non-manufacturing sector\t\t\t\t From Quebec2\t$26\t$39\t$17\t$40 Federal2\t$35\t$30\t$39\t$29 Net cost to company4\t$39\t$31\t$44\t$31 1.\t50% in salaries, 40% in routine expenses and 10% in equipment.2.\tThe federal tax credit is taxable in Quebec in the year following the year that it is claimed, eg, the credit is included in income in the same year in which it is claimed.3.\tThe federal investment tax credit becomes taxable at the federal level in the year following the year that it is claimed, eg, the credit is included in income in the same year in which it is claimed.4.\tIncludes the tax credits and savings resulting from income deductions.Source: Investissement Québec.Metropolitan area\tJob classification by inhabitant\t\t\t \tInfo Tech\tBiopharma- ceutical\tAerospace\tAll 3 sectors San Francisco\t1\t3\t8\t1 Seattle\t8\t10\t1\t2 Boston\t2\t3\t6\t3 Montreal\t4\t3\t2\t4 Dallas\t3\t14\t5\t5 Toronto\t5\t6\t11\t6 Wash.DC\t6\t9\t4\t7 Philadelphie\t10\t1\t7\t8 Atlanta\t7\t10\t8\t9 L.A.\t13\t8\t3\t10 New York\t12\t2\t11\t11 Houston\t9\t14\t13\t12 Chicago\t11\t7\t14\t12 Miami\t13\t10\t10\t14 Détroit\t15\t10\t14\t15 * In private-sector companies with 100 or more employees.Source: E&D Data, June 2000."]