Tableau de bord, région métropolitaine de Montréal = Trend chart, Greater Montreal region, 1 juin 2002, Anglais

[" QUARTERLY PUBLICATION OF STATISTICAL ANALYSIS OF THE BOARD OF TRADE OF METROPOLITAN MONTREAL PRODUCED IN PARTNERSHIP WITH CANADA ECONOMIC DEVELOPMENT VOLUME 4, NO 4, JUNE 2 002 HIGHLIGHTS MONTREAL ECONOMY ONCE AGAIN IN A GROWTH MODE Key indicators confirm that the economy of the Montreal region is on the rebound and should experience sustained growth throughout the coming months.In fact, the American economy is recovering at a stronger and faster pace than predicted, the job market is robust, construction and housing starts are on the rise, and production in the manufacturing sector, which had been hardest hit, has begun to increase.The most recent data on the U.S.economy indicates that companies have almost completed the liquidation of their inventories and that the demand for products used in the manufacturing process is growing.In the coming months, this growth in American manufacturing production will have a positive impact on orders flowing into our exporting companies and provide a boost to the Montreal economy, which exports more than 43% of its total production to the U.S.SOME POSITIVE NEWS ¦\tThe job market is making surprising progress ¦\tThe housing sector is enjoying strong growth ¦\tThe Montreal film industry is thriving ¦\tPassenger airline travel is slowly but surely recovering INDICATORS TO WATCH ¦\tExports here are resuming at a slower pace than elsewhere in Canada ¦\tA slight slowdown is being felt in the commercial real estate sector in downtown Montreal ¦\tThe tourism industry will experience a difficult year in 2002 ¦\tOne adolescent in six is not attending school in the new city of Montreal THE CED REPORT How is the needle trade faring in Montreal?1^1 Développement\tCanada Economic économique Canada Development Canada 2 North Belt Laval South Belt Montreal MAP of THE METROPOLITAN AREA ¦ Montreal, Laval and North and South Belts Population: 3.5 million 55% of Quebec\u2019s GDP Corporate tax: 75% of Quebec\u2019s total contribution 1.7 million jobs THE FOLLOWING STATISTICS cover the census metropolitan area (CMA).Where unavailable, the MMC territory or the City of Montreal were included.These are the latest statistics available at the time of printing Published and distributed free of charge by LEADERSHIP IMOntrea1 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: Eric Véronneau, economist Telephone: (514) 871-4000, ext.4052 Fax: (514) 871-1255 E-mail: everonneau@ccmm.qc.ca Revision and coordination: Madeleine Murdock Available on the Board of Trade\u2019s Web site at: www.btmm.qc.ca/presse/tdb 3 TABLE OF CONTENTS IGHTS 2.MAP OF THE METROPOLITAN AREA\t2 3.TRENDS AND OVERVIEW\t4 \u2022 United States\t4 \u2022 Canada\t4-5 \u2022 Quebec\t5 4.ECONOMIC CONDITIONS\t6 \u2022 Gross domestic product\t6 \u2022 Consumption\t7 \u2022 Labour market\t7-8 \u2022 Housing\t8 \u2022 Foreign trade\t9 \u2022 Financial markets\t9-10 5.ECONOMIC SECTORS\t10 Transportation\t \u2022 Air traffic\t10 Film industry\t11 Tourism\t12 Real estate\t13 6.QUALITY OF LIFE\t14 Poverty\t14 7.CANADA ECONOMIC\t DEVELOPMENT\t15-16 The clothing industry in Montreal\t Economic Development Canada Economic Développement B ^ B Development économique Canada Canada Prospering in Harmony Community Strength By uniting strength Canada Economic of Quebec comm We support their s, the community moves forward.Development promotes the efforts unities dedicated to going farther, business projects and their partnerships.Our goal:To support community strength.w S Chambre de commerce ¦ m.# à du Montr®al métropolitain Board of Trade f of Metropolitan Montreal 5 Place Ville Marie, plaza level, suite 12500, Montreal (Quebec) H3B 4Y2 Telephone: (514) 871-4000 Fax: (514) 871-1255 E-mail: info@ccmm.qc.ca TRENDS AND OVERVIEW UNITED STATES The U.S.economy has made a spectacular recovery since early 2002.During the first quarter of the year, the country\u2019s GDP advanced 5.8% against 1.7% in the fourth quarter of 2001, the strongest increase recorded in the past two years (4th quarter, 1999).The greatest contributor to this growth in the first quarter was without question the reinvestment in inventory, marking the end of the heavy inventory reductions that began in fall 2001.According to some analysts, this factor is responsible for 3.1% of the GDP growth, or over 50% of the increase.Household spending continued, with an increase of 3.5%, public spending rose 7.8% thanks to additional investments in defense and security, residential investment jumped 15.7% and exports climbed 6.8%.At the same time, our main trading partner saw imports rise significantly (+15.5%), which is good news for Montreal\u2019s exporters and for the Greater Montreal economy.The U.S.economy has also gone back to the business of creating jobs, adding 58,000 in March after losing 2000 in February.This is the first incidence of job growth in eight months.Notwithstanding these gains, unemployment increased slightly, from 5.5% in February to 5.7% in March.These employment statistics, however, hide sectoral disparities.For example, the services sector, which accounts for 70% of the U.S.economy, created 118,000 jobs in March while the manufacturing sector laid off some 114,000 people.Consumer confidence, which accounts for two thirds of the country\u2019s GDP, remains high, despite a slight dip of 1.3 percentage points in April in the University of Michigan Consumer Confidence Index, to 94.4%.Corporate investments in machinery and equipment dropped 0.5% in the first quarter, but this drop was mostly concentrated in transportation equipment since investments in high-tech equipment advanced 7.5%, the first increase in a year and a sign that companies are once again ready to invest.Given that the manufacturing sector was the main cause of the economic slowdown in the US, this sector\u2019s recovery over the course of the next few months will play a major role in the growth of the American economy.The ISM index, which reflects the intentions of purchasing managers in the manufacturing sector, reached 55.6% in March and, for the past few months has been pointing to an imminent recovery in manufacturing output.In conclusion, the economic recovery of our main trading partner is well underway and will continue through the upcoming months.What this means for Montreal area exporters is a significant increase in their order books this year\u2014good news indeed for a city whose U.S.-bound exports account for over 40% of its GDP.CANADA Data on the first two months of the year clearly show that the Canadian economy has rebounded with a bang.While consumers and governments kept things going during the slowdown last fall, companies are now getting into the act.Historically low interest rates and strong job creation kept consumer spending brisk and stimulated new residential construction.Indeed, 170,000 jobs were created during the first quarter of the year, a level of growth that is nothing short of exceptional.While the job market will likely not maintain this pace, some indicators point to a very robust job market in 2002.Manufacturing output, which had been especially affected by the economic slowdown, rebounded in January and picked up steam in February.And it\u2019s not over yet, because the strong economic recovery and new orders from the U.S.manufacturing industry will have a positive impact over the next few months on our exports and the volume of factory shipments.The housing market has enjoyed unparalleled growth in the past few months thanks to very favourable monetary conditions, strong job creation and a shortage of resale homes and rental dwellings.According to many analysts, housing starts will be very high over the next two years.Given that the Canadian economy is currently expanding faster than the United States, the Bank of Canada has revised its forecast and now projects GDP growth of 3.5 to 4.5% (annualized rate) for the first quarter of 2002 and 3.25% for the year.In this context, it has indicated that it will gradually increase interest rates to counter the risks of the economy overheating but without, however, affecting growth.In April, the official rate was increased by 0.25% to 2.25%. 5 An interesting fact: According to the International Monetary Fund (IMF), Canada\u2019s economic growth will over the next two years be higher than that of the seven most industrialized nations (G7), just behind the United States.QUEBEC The year 2001 began very sluggishly for the Quebec economy, but the third and fourth quarters saw improvement, which helped the province absorb the economic shock that followed the events of September 11.Despite the enormous effect the slowdown had on business, consumption remained strong, and the year ended with the province posting an annual growth rate of 1.3%.The general downturn was largely due to a decline in exports of manufactured goods (-2.6%), which itself was due to the slowdown in the U.S.economy and most notably the global slump experienced by the technology sector.Quebec exports in telecommunications equipment decreased by 64% last year, which affected the economy of the Montreal region in particular, home to the lion\u2019s share of companies in this industry in Quebec.However, this descent was partially offset by increases in the steel and aeronautical sectors.A recovery in the American economy that was faster and stronger than anticipated and the end of corrections to inventories will have a positive impact on our exports over the coming months.Since January 2002, the growth in the employment market has been astounding.In fact, during the first quarter of the year, no less than 69,000 jobs were created in Quebec, or close to 40% of those created across Canada for the same period.In March alone, the Quebec economy saw an increase of 32,000 new jobs.While it is unlikely that the employment market will be able to sustain this rate of growth, it will nonetheless remain robust throughout 2002.The housing market is currently very active in Quebec.A particularly dynamic home resale market has reduced the number of homes available and in doing so boosted the number of new houses being constructed.In fact, many buyers are finding that existing houses are becoming too rare and are turning instead to new home construction.All indicators (housing shortages, a healthy job market and low mortgage rates) point to strong growth in new housing starts in 2002, despite recent signs that mortgage rates may be on their way back up.Public investment in infrastructures will be considerable in 2002 and 2003 and will therefore have a significant impact on the growth of the Quebec economy during the period.Moreover, some 50% of the $3 billion announced in the most recent provincial budget will be put towards infrastructures beginning this year, with much of this money earmarked for the Montreal region.Prospects for improvement in the Quebec economy are very good, with financial institutions now predicting annual growth of 2.6 to 2.8% for 2002. ECONOMIC CONDITIONS GROSS DOMESTIC PRODUCT MANUFACTURING OUTPUT SHOWS ENCOURAGING SIGNS After expanding 0.6% in January, Canada\u2019s gross domestic product (GDP) posted a strong increase of 0.5% in February, advancing for the fifth consecutive month and thus marking the longest such sequence in two-and-a-half years.There is no longer any doubt that the Canadian economy is indeed back on track.While consumer demand helped ease the recent Canadian economic slowdown, the manufacturing industry is now stepping up to the plate and showing encouraging signs.While most sectors recorded an upturn in activities, manufacturing contributed the most to GDP growth in February, with an increase of 2.3%, the largest increase in 42 months.Indeed, this industry, which represents 17% of the economy, accounted for 80% of GDP growth in February.Strong demand for new residential construction and resale homes had a positive impact on several industries.Moreover, the residential construction sector advanced 0.9%, thus recording an increase for the fifth consecutive month.As well, a number of other feeder industries, such as glass and asphalt manufacturers or receiving industries such as paint and other construction materials, also saw a significant increase in their activities.Automobile manufacturing also posted strong growth with a surge of 13.2%.Since 87% of all Canadian automobile manufacturing is intended for the U.S.market, car exports increased 12% in February.At the time of writing, no data on Quebec GDP had been published for 2002.However, in the fourth quarter of 2001, the province\u2019s GDP had advanced 0.4%, after shrinking 0.4% in the previous quarter.Canada's GDP In billions of $ from 1997 All industries HMH Source: Statistics Canada The rapid U.S.economic recovery and the significant gains in manufacturing orders will, as the ISM* index shows, have a very positive impact on our exports and factory shipments in the upcoming months.As for the tightening of monetary policy by the Bank of Canada, we believe that current interest rates are still very conducive to growth.As well, the risk that the economy will overheat is lower than in previous recessions because consumer spending remained high during the downturn.* Institute for Supply management, ex-NAPM. 7 JOB MARKET JOB MARKET SURPRISINGLY ROBUST According to the labour force survey published by Statistics Canada, the Canadian economy created 88,000 new jobs in March, the best monthly increase since 1976.This solid performance brought the unemployment rate down from 7.9% in February to 7.7%.Moreover, 170,000 new jobs were created in the first quarter of 2002, the strongest quarterly gains since 1987.However, 48,000 of these positions (55%) are part time, and 40,000 are full time.These figures should not be construed negatively as it is normal for part-time jobs to grow faster than full-time jobs at the beginning of an economic recovery.While 12 of the 16 industrial sectors recorded job growth, the largest increase in employment occurred in management, administrative and other support services, where an additional 27,000 were employed, followed by wholesale and retail sectors, which created 18,000 jobs.Quebec is also faring well, enjoying the strongest employment growth of all the provinces.In March alone, 32,000 jobs were created here at home, bringing the total to some 60,000 for the first quarter of 2002.Compared to Q4 2001, which saw 9,500 jobs disappear, this increase is quite substantial.The unemployment rate in March was 8.9%, a drop of 0.4% over February.Just as for Canada as a whole, the gains stemmed primarily from part-time jobs (+42,000), i.e., 61% of the total, while 10,000 full-time jobs were lost.The services sector enjoyed the greatest increase, with 20,000 new jobs in the wholesale and retail trade.Job creation slowed somewhat in Metropolitan Montreal, where 10,000 new jobs were created, against 35,000 in January Quebec employment (deseasonalized data) 2000-2002 A M J J A S 2000 0 N 0 J F M A M J J 2001 A S 0 N D wmm Source: Institut de la statistique du Québec | Monthly\tp] Jobs variation\t and February.Still, the number of unemployed people decreased by 6,000 during the same period, reducing the jobless rate by 0.3%, to 8.9%.While it is unlikely the job market will maintain this exceptional pace, many signs indicate that employment growth will remain high over the next few months.CONSUMPTION CONSUMER SPENDING REMAINS BRISK Thanks to low interest rates, a good job market and a 3.2% increase in personal disposable income in 2001, consumer spending has remained brisk despite a slight slowdown in February.According to Statistics Canada, retail sales shrank marginally in February (-0.1%) for the first time in five months.Despite this slight dip, retailers in January and February recorded their highest annual increase (6.9%) since July 2001.The slight downturn stems primarily from a drop in sales in the furniture (-1.6%) and automobile (-0.7%) sectors.It should be mentioned that over the past 12 months, sales in both these sectors, stimulated by attractive financing plans and an increase in housing starts, respectively advanced 10.9% and 17.1%.Quebec retail sales (seasonally adjusted) 2000-2002 MAMJ JAS0NDJ F Nl A 2000 M J J A S 0 2001 Source: Institut de la statistique du Québec | Monthly p] Retails variation\tsales 344291599419911995 94579449955995^99^ We can take pride in the fact that in February Quebec led the country in retail sales growth (+2.2%).Having gained a lot of ground since fall 2001, retail sales in Quebec between February 2001 and 2002 exceeded the Canadian average, with an increase of 8%, against 6.9% for Canada as a whole.The wholesale trade, for its part, increased 0.2% in February.Marking the fourth consecutive monthly increase, Canadian wholesale sales were stimulated by strong consumer demand and an increase in housing starts.As for the future, many factors indicate that consumers are not about to stop spending.The impressive growth of the job market (+69,000 jobs in the first quarter) will help keep consumer confidence high.The only element that could slow consumption would be a too rapid hike in interest rates by the Bank of Canada in order to prevent the economy from overheating.However, such a move by the Central Bank is unlikely because consumer spending was already high before the economic recovery, which reduces the risk of inflation.HOUSING HOUSING IS BOOMING Stimulated by historically low interest rates, strong job creation and a positive economic outlook, housing starts in Canada advanced 10.9% in March according to the Canadian Mortgage and Housing Corporation (CMHC), an increase of 34.4% over March 2001 and 31.2% for the first quarter of the year.For its part, Quebec is enjoying its best early-year performance in ten years.Housing starts jumped 30% between February and March, a 56% increase in a single year and a rate that far exceeds the national average.Just as in Canada as a whole, construction of single-family dwellings (+2,290) led the way, ahead of multiple dwellings (2,590).This surge can be explained by the fact that demand for resale housing far exceeds supply, forcing potential buyers to turn to new construction.In Metropolitan Montreal, residential construction has also had a strong start in early 2002 regardless of the type of dwelling.\u201cHousing starts have skyrocketed for the third consecutive month,\u201d affirms the CMHC.March saw 1,628 new houses built, an upsurge of 48% over last year and 60% over the same quarter a year earlier.The greatest increase comes from the off-island suburbs to the north, which accounted for nearly 40% of all housing starts, with Laval and the North Shore recording 1,654 housing starts, against 693 on the South Shore.And the vibrant resale market, in which demand is outstripping supply, has sent prices soaring.In the past year, the average price of properties has increased 10% in the metropolitan region, and if this trend continues, it could dampen the currently strong demand.Housing starts (Quebec) (deseasonalized data) Seasonally adjusted, 2000-2002 10,500 AMJJASONDJ FMAMJJAS0NDJ FM Source: Institut de la statistique du Québec 11 Monthly p] Housing variation starts The increase in interest rates will have little effect in the short term on housing starts since a shortage of rental housing and strong demand for new dwellings will continue to stimulate residential construction in Greater Montreal.As well, strong job creation combined with public spending aimed at adding 6,500 units by 2003 will exert additional pressure on housing starts in the near future.941995499449944394 9 FOREIGN TRADE Quebec's international exports (deseasonalized data, monthly adjusted) Quebec 2000-2002 M A M J J A 2000 Source: Institut de la statistique du Québec RamoRiiiMpieiaiieii I Monthly pl Export value variation ^ EXPORTS PICK UP MORE SLOWLY IN QUEBEC THAN THE REST OF CANADA In February, Canadian exporters shipped $33.7 billion of goods, an increase of 2.7% over January, the strongest monthly growth since May 2000.Automobile exports were especially robust, advancing 12%.Indeed, this industry alone accounted for 25% of the country\u2019s total exports in February.In contrast, the aircraft and other transportation equipment sector saw its exports drop 21.3% to $2.1 billion.However, according to Statistics Canada, this monthly drop in the sector merely signals a return to normal, since aircraft shipments reached a record level in January.Canadian imports also rose substantially during the same month (+5.7%), the strongest monthly increase since August 1998.The increase of 5.1% in consumer goods, 5.5% in machinery equipment and 7.6% in communications equipment imports bodes very well for the Canadian economy, signaling a strong recovery in domestic demand and industrial activity.In Quebec, international merchandise exports shrank 0.3% in January, after dropping 4% in December.The value of exports in January 2002 was 8.5% lower than a year earlier.Since 85% of our out-of-province shipments are intended for the U.S.market, Quebec was especially hard hit by the economic slowdown south of the border.The tech meltdown was mostly responsible for this slide.Indeed, sales of telecommunications equipment, which accounted for the largest share of our international exports, tumbled from $12 billion to $6 billion last year.However, it now appears that the telecommunications equipment sector has come out of its slump and should gradually pick up steam over the next few months.The strong U.S.recovery and the end of the inventory correction will stimulate domestic demand in the U.S.in the upcoming months, fuelling expectations that Quebec exports will rebound as of the second quarter 2002.FINANCIAL MARKETS INFLATION RATE In March, the Consumer Price Index (CPI) was up 0.7% over February.This rise - the fourth consecutive increase in as many months - was due primarily to a 9.2% jump in gas prices.In fact, the cost of a barrel of crude oil rose from about $30 in January to almost $38 in March.The upturn in the global economy and the current political instability in the Middle East were jointly responsible for this increase in the price of black gold.Other factors contributing to the increased CPI included higher prices for electricity, lettuce, organized tours, and cigarettes.The strong recovery of the Canadian economy com- bined with the rapid growth of the job market will intensify inflationary pressures in the coming months.The Bank of Canada will attempt to counter this trend by gradually increasing interest rates between now and the end of the year.INTEREST RATES Between January 2001 and January 2002, the Bank of Canada cut its interest rate ten times, for a total drop of 375 basis points.Between September 11 and January 15, the rate plummeted 200 points to a forty-year low of 2%.Since then, however, the strong recovery of the Canadian economy has forced the Bank of Canada to counter inflation by increasing its rate by _ percentage point to 2.25%.David Dodge, governor of the Bank of Canada, has indicated that the central bank is targeting 5991 10 a neutral policy, designed to contain inflation without stifling growth.Many analysts expect to see interest rates edge up about 1.25% in 2002, with a repeat performance in 2003.EXCHANGE RATES The Canadian dollar has finally begun to climb.In the past few months, the loonie has made significant gains on the U.S.dollar.In fact, since dropping to a historic low of $62.49 last lanuary, it jumped almost 2%, to $63.78, by April, its highest level since December 2001.The announcement by Governor David Dodge at a meeting of the central bank in April that the Bank of Canada planned to tighten its monetary policy in the coming months had an invigorating effect on the Canadian dollar.With the recovery of the U.S.economy, which will stimu- late demand for our products and a gradual increase in Canadian interest rates, we can expect the loonie to continue to make gains on the greenback, through to the end of 2002.STOCK MARKETS Stock markets have been extremely volatile since the start of the new year, particularly in February, when uncertainty related to the Enron affair had a negative impact on market indexes, which have nevertheless crept up since April.The steady supply of good news regarding the strong recovery of the North American economy has bolstered investor confidence and prospects for corporate profits.We can therefore expect market indexes to rise in the next few months.ECONOMIC SECTORS TRANSPORTATION AIR TRAFFIC PASSENGER TRAFFIC IS SLOWLY GAINING GROUND IN MONTREAL Despite the global economic recovery, passenger traffic at Dorval airport remains far below what it was before September 11.Still, since December, the number of passengers has begun to increase in Dorval, after dropping more than 36% between August and November 2001.According to the latest data of Aéroports de Montréal (ADM), passenger traffic increased 6% between December 2001 and February 2002 but remains 12.4% below the corresponding month in 2001.It is interesting to note that the biggest drop in the number of travellers involves domestic flights, which in February carried 17.3% fewer passengers than the same period a year ago, compared with a decrease of 10.7% for trans-border flights and 1.3% for international flights.For its part, Mirabel has also seen a slight increase in the number of passengers since December, but in February this figure remained far below (-40%) the number of travellers recorded in the corresponding year-earlier period.On a North-American scale, Dorval airport\u2019s situation is similar to others, since according to IATA (International Air Transportation Association), average passenger traffic in all North American airports in February was 10.4% below the level for the same month a year earlier.As for the future, according to the International Civil Aviation Organization (ICAO), global air traffic should make a strong Total passengers at Montreal airports 1,025,000 975,000 925,000 875,000 825,000 775,000 725,000 675,000 625,000 575,000 Source: Aéroports de Montréal comeback over the course of 2003 and will possibly attain, within 2 years, the same level and growth it had before the tragic events of September 2001.The organization bases its forecast on the fact that consumer confidence has been almost fully regained and on the positive outlook concerning global economic growth. 11 CINEMA THE FILM INDUSTRY IN MONTREAL In the past 10 years, the film production industry in Montreal has enjoyed spectacular growth that shows no signs of abating.Despite a drop in activity of nearly 30% last year following a strike threat by American actors and Canadian technicians and the events of September 11, film production expenditures in Montreal have soared 300%, from $276.2 million in 1992 to $829.4 million in 2000.Still more interesting is the fact that 40% of these expenditures come from foreign productions, primarily from the United States.As a result of major efforts to promote the advantages of Montreal to the major U.S.studios such as the diversity of Montreal\u2019s shooting locations, the abundance and quality of its labour force and the advantages of a weak Canadian dollar, foreign production expenditures have gone from zero in 1992 to over $337 million in 1992.In Canada, Quebec is faring quite well, accounting for 27% of all film and television production expenditures in Canada ($4.969 billion), most of which are made in Montreal.Quebec ranks second just behind Ontario, which accounted for 40%, or $1.966 billion of the country\u2019s film production expenditures in 2000.Foreign production expenditures in Quebec have increased 41% over the past five years and 58% between 2000 and 2001, while the country recorded an average increase of 23% and 17% respectively during these two periods.In this regard, Quebec ranks third, with 19% of foreign films shot in Canada, behind Ontario (31%) and British Columbia (43%).However, our province, more specifically Greater Montreal, is quickly catching up: the number of foreign films shot here over the past five years has increased twice as fast as in the other two provinces.Films shot in Montreal provide major economic spinoffs for the city.According to the Montreal Film and Television Commission, direct and indirect spinoffs have more than tripled, from $539 million in 1992 to over $1.8 billion in 2000.Movie production also boosts employment here at home: according to Statistics Canada, each job created in the industry creates another 1.6 indirect jobs.In 2000-2001, the movie industry generated a total of 36,400 jobs in Montreal (22,750 direct and 13,650 indirect).Moreover, the Syndicat des techniciens du cinéma et de la vidéo du Québec affirms that the number of members and permit holders/licensees?has more than tripled since 1992, from 929 in 1992 to 3,399 in 20001.Only one threat looms on the horizon: the considerable efforts expended by some film industry groups to stop the exodus of productions to Canada.In fact, earlier this year California Governor Gray Davis tabled a highly ambitious tax incentive plan that would, if adopted, save producers who shoot their films in California millions of dollars.This plan calls for a 15% reduction in income tax on the first $25,000 earned by employees in a Film production expenditures and economic spinoffs for Montreal (in millions of Canadian dollars) 1992\t1993\t1994\t1995\t1996 1997\t1998\t1999 2000 Economic spinoffs ¦¦ Direct spending Source: Bureau du cinéma et de la télévision de Montréal production with a budget of less than $10 million2.However, Mr.Lafond states that the plan would affect Toronto and Vancouver more because they handle many productions from California.As well, two thirds of the foreign productions shot in Montreal have budgets in excess of $25 million and would therefore not be eligible under the plan.Still, the stakeholders in Montreal\u2019s film industry must remain vigilant in the face of these pressures, because if the various pressure groups in California truly band together, the outcome could be quite dire.In conclusion, and according to the commissioner of the Montreal Film and Television Commission, André Lafond, 2002 promises to be a banner year for film production in Montreal, with at least 20 American productions slated to be shot in the city this year.' «Cinéma : L\u2019empreinte du géant» by Éric Desrosiers, Le Devoir, February 2, 2002 2 «L\u2019empire californien contre-attaque» by Sébastien Rodrigue, La Presse, January 14, 2002 Other source: Profil 2002 de l\u2019industrie canadienne de la production cinématographique et télévisuelle, published by the Quebec Film and Television Producers Association 12 TOURISM 2002 WILL BE A DIFFICULT YEAR FOR MONTREAL TOURISM According to Statistics Canada, 3.8 million travellers entered Canada in February, a 0.6% increase over January this year.In addition, stays of one night or more increased 2% over January and 1.6% over February 2001.This is the first significant monthly increase since August 2001.On the other hand, while Canada\u2019s tourism industry has grown overall, Montreal is still waiting for visitors to return.In February 2002, the Greater Montreal hotel occupancy rate was 56.4%, down 3.5% over the same period last year.Since the start of this year, the number of tourists staying in Montreal hotels was down 6% over the same period last year.Quebec City seems to be faring much better in this regard, with the Office de tourisme et des congrès de Québec reporting that hotel occupancy in the region was up 3.6% in February and 2.5% in March over the same periods last year.These somewhat surprising results can be explained by the fact that there is generally a lag between an upturn in the economy and an upturn in business travel.Since business tourism plays a much bigger role in Montreal\u2019s economy than in that of Quebec City, it is only natural that the current level of tourism activity is comparatively lower in Greater Montreal.According to Tourisme Montréal, however, the volume of tourism industry activity will fall again in 2002.In fact, it will be almost three years before tourism returns to the record levels seen in 2000.In April, in an attempt to reverse this trend and stimulate the recovery of Montreal\u2019s tourism industry, Tourisme Montréal launched its biggest promotional campaign ever with an investment of $8 million.This investment called upon the participation of both levels of government, private partners of Tourisme Montreal, and some multinational corporations.Just one of the measures planned involves the insertion of 17 million brochures in the most prestigious North American magazines.The goal of this campaign is to attract more tourists next year and promote Montreal as a city that, like New York and San Francisco, is unique in North America.Greater Montreal hotel occupancy (2000-2002) % mtrn NIAMJJASOND JFMAMJ JASON 00 00 00 00 00 00 00 00 00 00 00 01 01 01 01 01 01 01 01 01 01 01 Source: Association des hôtels du Grand Montréal D J F 01 01 02 We can only hope that, combined with sustained economic growth, this campaign will have a positive effect on Montreal\u2019s tourism industry, which generates more than 60,000 jobs and $1.7 billion in economic spin-offs for Greater Montreal.8759945942911991 MONTREAL REAL ESTATE MARKET 13 COMMERCIAL REAL ESTATE MARKET SLOWS DOWN IN DOWNTOWN MONTREAL The uncertain business climate created by the economic downturn last fall has put the brakes on real estate activity in downtown Montreal.According to the latest market study conducted by Devencore over the past six months (2001), the vacancy rate in prestigious downtown buildings remains practically unchanged, nudging up only 0.1% to 7.9%.This rate, which has been dropping steadily since 1994, reached its lowest level in 15 years at the end of 2000, dropping to 7.8%, in contrast to 17.9% in 1993.Indeed, only 69,000 square feet of office space became available out of a total of 39,370,148 square feet.Since the vacancy rate remains very low, this situation will not have a downward effect on rent prices in downtown Montreal.However, the arrival of a number of commercial real estate projects could, in the medium term, drive prices down, or at least stabilize prices if Montreal\u2019s economic growth maintains its current pace.Moreover, three of the four major projects announced in the past 18 months are currently underway and will add some 1.8 million square feet of new high-end space in the downtown core.The projects are: phase 1 of E-Commerce Place, 500,000 square feet that will be occupied entirely by CGI; phase 2 of the project (400,000 square feet), of which 50,000 square has have already been leased to Computer Science Corp; the renovation of the Eaton building (+ 435,000 square feet), almost half of which is already leased; and lastly, the Caisse de dépôt et placement\u2019s new 600,000-square-foot building in the Quartier International, reserved exclusively for the owner.For its part, Westcliff Group\u2019s 630,000-square-foot project, which was to have been built in Victoria square, remains on the back burner.High-end office space in downtown Montreal j.20\t15 13,20 ,80 7,90 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Devencore Notwithstanding the construction boom downtown, supply is far from abundant.However, if Montreal\u2019s economy continues to soar, we can expect developers to announce new projects before the end of the year. 14 SPECIFIC ECONOMIC SECTORS POVERTY SCHOOL ATTENDANCE AND LEVEL OF EDUCATION IN THE NEW CITY OF MONTREAL Over the past decade, Montreal\u2019s economic landscape has evolved considerably.Today, the Greater Montreal economy is more international, and high-tech sectors account for a greater proportion of its makeup.With this evolution comes the need for a far more qualified workforce, one that requires much more than a basic education.And so it is worrisome to note that the provincial high-school dropout rate is highest (34%) right here in Montreal\u2014Quebec\u2019s economic engine.It stands to reason that if a large part of the new generation does not attend school, it will be far less equipped to successfully integrate into the job market, and by extension, into Montreal society.According to a study 1 conducted by the Conseil régional de développement de l\u2019île de Montréal (CRDÎM), 13% or 12,950 young people between the ages of 15 and 19 in the new city of Montreal do not attend school.The study also found that the rate of non-attendance exceeds the city\u2019s average in 12 out of the 27 boroughs.In the boroughs of Plateau Mont-Royal (22%), Verdun (21%), Ville-Marie (21 %) and South-West (20%), one out of five young people do not attend school.It should be noted that the boroughs where school non-attendance is higher than average are also the most economically disadvantaged.Indeed, the rate is highest among the 35% of Montrealers living below the poverty line.As for the level of education of the population of the new city of Montreal, one out of three (30%) has a university education, 20% have graduated college, 29% have completed high school, and 18% did not finish elementary school.In the boroughs, the variations in level of education are substantial.For example, the percentage of university graduates between 25 and 44 is clearly below average in Montreal North (18%), Rivière-des-Prairies/Pointe-aux-Trembles/Mtl-East (22%), Saint-Leonard (28%) and Villeray/Saint-Michel/Parc-Extension (28%).In contrast, it is higher than the average in Westmount (84%), Mount-Royal (77%), Outremont (72%), Côte-Saint-Luc/Hampstead/Mtl-West (68%) and Beaconsfield/Bain-d\u2019Urfé (68%).The same holds true for the under-educated (less than grade 9) segment of the population.In the boroughs of Villeray/Saint-Michel/Parc-Extension, South-West, Montreal North and Merci-er/Hochelaga-Maisonneuve, more than 20% of the population in Highest level of education based on type of population (New city of Montreal) High school grade 9 Total population II Population living below the poverty line H ____________________________Immigrants I I Source: Statistics Canada 16 census areas have a low level of education, including Ville-Marie, where 40% of men between 25 and 44 have not completed grade 9.In contrast, less than 1% of all the boroughs on Montreal\u2019s West Island have a low level of education.As well, according to the Quebec Education Ministry, the percentage of young people who have obtained their high school leaving diploma is lower in Montreal than in most Quebec regions.With an increasing dropout rate (+34%), a graduation rate of 64.5% and 14% of the Montreal population lacking a grade 9 education, political and economic decision makers have cause for concern, because the economic prosperity of the region hinges today, and will depend even more tomorrow, on the knowledge economy.If this trend persists, we have every reason to believe that the Montreal economy will have to do without some 20% of its raw material, in other words, its workforce, and will have to pay the heavy price that comes with it. 15 CANADA ECONOMIC DEVELOPMENT REPORT SIZING UP THE CLOTHING INDUSTRY The clothing industry accounted for 53,036 jobs in Quebec in 2000, about 34,000 of them on the Island of Montreal, which is home to 38% of Canada\u2019s jobs in this sector.BACKGROUND The liberalization of trade resulting from trade agreements and the globalization of markets is intensifying international competition and expanding the geographic horizon for strategic investment by multinationals.The clothing sector, and, to almost as great an extent, the textile sector, is encountering strong pressure from gradual changes in trade policy.Since these industries are able to operate with a rather unskilled labour force, they are becoming highly sensitive to international competition.Subsequently, the adoption of the Free Trade Agreement and the North American Free Trade Agreement (NAFTA), undoubtedly had a decisive impact on Quebec trade, since the relative percentage of total shipments exported to the United States has quintupled in 10 years.In this same period, Chinese suppliers remained the primary source of imports and now hold 32% of the Quebec market.MONTREAL\u2019S POSITION Quebec clothing industry shipments in billions of dollars 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Other Quebec shipments ¦ j Exports to the United States f Source: Statistics Canada for shipments and Industry Canada for exports.Liaison Montréal Mode, an organization bringing together the major clothing associations, indicates that Quebec entrepreneurs are renowned for a skilled labour force, advanced technology, unparalleled quality, short turnaround time and reliability.In short, Montreal is an uncontested international fashion center, where the majority of the clothing produced in Quebec is designed, manufactured or flows through.Moreover, Montreal has developed specialized niches:\tchildren\u2019s fashion, sports clothing and swimsuits.With its leading-edge automation and high productivity, Montreal has been able to keep its prices very competitive on international markets.Lastly, Montreal has benefited from a network of fashion design schools that provide companies in this sector with the creativity required to design middle- and high-end clothing.Quebec foreign trade \t1992\t\t2001\t Imports\t%\tMillions of $\t%\tMillions of $ China (with Mongolia)\t21,7\t280\t32,4\t670 Inda\t4,8\t62\t11,0\t321 Hong Kong\t18,2\t235\t9,5\t194 United States\t5.5\t71\t5.8\t121 Mexico\t0,3\t3,3\t1.1\t23 Other\t49,5\t639,7\t40.5\t858 Total\t100\t1291\t100\t2 097 See next page for exports board. 16 STATE OF THE INDUSTRY The industry can trace its roots back to the days of the fur trade and has been changing ever since.The trends toward an increasingly complex supply chain, the integration of activities, just-in-time manufacturing and production automation, which have become common to most sectors, are part of the picture for the clothing industry.Marketing channels are already becoming integrated, since the number of establishments fell by 591 between 1992 and 1999, while the number of jobs rose by 9,890.In addition, market proximity allows manufacturers to cover the eight annual fashion seasons.However, supplier proximity is not as deciding a factor for less diversified retailers.Shipment growth, while slow, is far from the dramatic decline forecasted when NAFTA was signed.PROSPECTS The next deadline for signatories of the Uruguay Round Trade Agreement to liberalize their protective barriers will be December 31, 2004.Consequently, the gradual phase-out of custom tariffs will allow some exporting countries to become more competitive and intensify international competition.Improving productivity, a necessity to remain competitive, will create some problems such as obtaining financing for the constant renewal of leading-edge equipment and being able to hire qualified labour from a labour force in great demand.There is thus a strong probability that holding market niches will become even more determinant in retaining a comparative advantage.In addition, since it is difficult for demographic growth to provide for an increase in industry activities, the development of export markets is a strategy recognized by public stakeholders.The United States is a gigantic market with strong potential, since Quebec exports accounted for only 0.5% of it in 2000.Obviously, the larger a role exports play in shipments, the more the sector will be at the mercy of foreign trade policy (as the softwood lumber conflict clearly demonstrates).In short, when all these factors are taken into consideration, the future does not look very restful.Quebec foreign trade \t1992\t\t2001\t Exports\t%\tMillions of $\t%\tMillions of S United States\t89,2\t282\t96,5\t1639 United Kingdom\t0,7\t2,3\t0,9\t16 Mexico\t0.2\t0,6\t0,1\t1,7 Others\t9,9\t31,1\t2,5\t41,3 Total\t100\t316\t100\t21 698 Source: Institut de la statistique du Québec Number of jobs and establishments in clothing industry 1 600 1 400 1 200 1 000 800 600 400 200 0 1992\t1999 \t \t \t \t \t \t \t \t \t Number of establishments Ml Number of jobs»\u2014\u2022 Source: Statistics Canada for shipment and Industry Canada for exports.by Dany Provençal Canada Economic Development With the assistance of Stéphane Pronovost et Marie-Claude Collette Canada Economic Development "]