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When one sector falls, another goes up

Diversification ensures our stability

By: Martin Cash

Posted: 11/3/2012 1:00 AM | Comments: 0

Though they'd never say it out loud, the folks at Bristol Aerospace probably cringe every time they hear critics of the Joint Strike Fighter weigh in on why it was wrong for Canada to commit to buying the expensive jets.

That's because Bristol has bet heavily on the program -- about $120 million -- including building a new production facility, purchasing all sorts of new equipment and borrowing more than $60 million from two levels of governments to do it.

While Canada has not yet altered its order for 65 of the jets, if it does, Bristol's status as a supplier and its projected $1 billion in revenue from the program would likely become less assured.

That uncertainty, along with the closure this year of Aveos Fleet Performance Inc. that eliminated 400 well-paying manufacturing jobs, are a couple of the reasons RDA Global, a market research firm, forecast a 10.5 per cent decline in the aerospace sector in Manitoba over the next five years.

RDA Global did the work for Economic Development Winnipeg. Greg Dandewich made reference to the findings in his presentation to the Manitoba Association of Business Economists' annual outlook conference on Friday.

Dandewich, EDW's vice-president, did so somewhat sheepishly, noting how such forecasts often don't come true.

But the potential declines in aerospace -- however unlikely they may be -- are almost apropos seen in conjunction with all sorts of other indicators discussed at the conference.

They showed once again how the diversity of the provincial economy is its most powerful feature.

Narendra Budhia, director of economics and fiscal analysis with the province's Department of Finance, earlier noted aerospace output had surpassed transportation equipment sales this year.

The aerospace industry is notoriously cyclical, as is the urban bus business, which has been desperately slow in the aftermath of the financial crisis. But it will pick up again when U.S. municipalities get their fiscal act in order and their aged buses need to be replaced.

The knock on Manitoba's economy has always been it lacks the elements that could produce dramatic growth and it underperforms against the rest of the country during healthy economic times, and outperforms during slow growth or recessionary times.

Manitoba's economy grew by only 2.2 per cent in 2010, about a percentage point slower than the Canadian average, but that was preceded by the slightest decline of 0.2 per cent in Manitoba in 2009 when the rest of the North American economy shrank by around three per cent.

Year after year, one piece of the Manitoba puzzle shines when another falters, usually driven by global economic conditions.

In 2011, agricultural output fell by 14.7 per cent when the Assiniboine River flooded and made about three million acres of otherwise rich Manitoba farm land unplantable.

This year, those receipts are going to be way up.

In the mining sector, base metal prices are coming down, but oil prices -- and production in Manitoba -- have been going up so in 2011, when the provincial economy grew by only 1.1 per cent, mining had the strongest growth at 5.7 per cent.

Diversification is the classic hedge, any slightly conservative financial consultant will tell clients.

But when it comes to the performance of the Manitoba economy, signs are starting to emerge that some of the long-term bets may be paying off.

At the other end of the spectrum of the RDA Global forecast is a 22 per cent increase in the life sciences sector over the next five years.

Not just biotechnology, it includes some of the developments taking place in areas such as functional foods and nutraceuticals and is reflective of investments that have been made in that field.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition November 3, 2012 B5

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About Martin Cash

Martin Cash joined the Free Press in 1987 as the paper’s business columnist.

He has spent two decades chronicling the city’s business affairs.

Martin won a citation of merit from the National Newspaper Awards in 2001 for his coverage of the strike and subsequent multi-million-dollar union settlement at the Versatile tractor plant. He has also received honours and awards for his work on agriculture and technology development in Manitoba.

Martin has written a coffee-table book about the commercial and industrial make-up of the city, called Winnipeg: A Prairie Portrait.

Martin Cash on Twitter: @martycash

martin.cash@freepress.mb.ca

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