ECONOMIC STUDIES | OCTOBER 7, 2020 ECONOMIC VIEWPOINT Overview of Quebec’s Manufacturing Regions for 2020–2021 Due to the pandemic, economic growth for Quebec’s manufacturing GRAPH 1 regions will be negative in 2020, as it will be for the province as a Economic growth in Quebec's resource regions should return to positive territory in 2021 whole (graph 1). Quebec will outperform the economies of all the 2020f 2021f manufacturing regions with the exception of Chaudière-Appalaches. Chaudière-Appalaches -4.6 5.9 The manufacturing sector remains heavily impacted by the current public health and economic crisis, and the production capacity of Quebec as a whole -4.6 6.2 many businesses is still limited. They continue to face difficulties Estrie -5.0 5.9 replenishing inventories to meet demand due to supply chain Mauricie disruptions during the lockdown and remaining restrictions on -5.3 5.2 international trade. It’s also worth noting that many exporting Centre-du-Québec -5.5 5.2 companies will likely have to wait until late 2021 to return to -6 -5 -4 4 5 6 7 pre-pandemic levels. The speed of next year’s expected recovery Annual variation in % Annual variation in % will depend on the driving industries of each manufacturing region. f: Desjardins forecasts Source: Desjardins, Economic Studies However, the recovery could take longer if the second wave of the pandemic became bad enough to require a new general lockdown, which would mean downgrading our outlooks. This represents the most significant risk at the present time in the forecast scenario. MAP 1 Quebec’s regions Nord-du-Québec Côte-Nord Saguenay– Lac-Saint-Jean Gaspésie– Îles-de-la-Madeleine Abitibi- Bas- Témiscamingue Mauricie 1 – Resource regions Saint-Laurent Lanaudière Capitale- 2 – Manufacturing regions Laurentides Nationale 3 – Urban regions Outaouais Chaudière- 4 – Capital regions A - Laval Appalaches D B - Montréal C - Montérégie C A Estrie D - Centre-du-Québec B Source : Desjardins, Economic Studies François Dupuis, Vice-President and Chief Economist • Mathieu D’Anjou, Deputy Chief Economist • Chantal Routhier, Senior Economist Desjardins, Economic Studies: 418-835-2450 or 1 866-835-8444, ext. 5562450 • [email protected] • desjardins.com/economics NOTE TO READERS: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. The data on prices or margins are provided for information purposes and may be modified at any time, based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. The opinions and forecasts contained herein are, unless otherwise indicated, those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group. Copyright © 2020, Desjardins Group. All rights reserved. ECONOMIC STUDIES Population Growth Will Remain Positive The challenges of workforce attraction and retention remain Based on the projections of the Institut de la statistique major concerns. Despite an unemployment rate that is expected du Québec (ISQ), on average, population growth in the to remain higher than pre-pandemic levels for the long term, manufacturing regions in 2020 and 2021 will be slightly below some business sectors are actively seeking labour. Furthermore, that of the last two years (graph 2). The Mauricie region will the current climate has accentuated difficulties in hiring foreign see the lowest growth, primarily due the increased aging of its workers that existed prior to the pandemic. As shown in graph 4, population compared to that of its counterparts. labour replacement indexes have been below 100% for several years, signalling a lack of young workers to fill vacancies left by GRAPH 2 retiring workers. This is putting pressure on the labour market Population growth will slow somewhat by narrowing the gap between labour supply and demand. For Average 2018-2019 Average 2020f–2021f example, Mauricie will post an index of 62% in 2021, meaning that for each group of 100 workers between the ages of Centre-du-Québec 0.7 0.5 55 and 64 that leaves the labour market, there will be 62 people Chaudière-Appalaches 0.5 0.4 who are of age to replace them (20 to 29). Compared with 2016, this will represent a drop of 24 points for this index. Estrie 0.9 0.7 Mauricie 0.3 0.2 GRA The replacemen rema low Quebec as a whole 0.9 0.7 Replacement index 0.0 0.5 1.0 1.5 0.0 0.5 1.0 In % Annual variation in % Annual variation in % Labour replacement 120 index: f: Institut de la statistique du Québec projections, based on the baseline scenario for 2019 109 20-29 years x 100 Sources: Institut de la statistique du Québec and Desjardins, Economic Studies 102 100 97 97 96 55-64 years 87 86 86 83 77 77 79 78 80 73 For the manufacturing regions as a whole, migration 68 68 68 63 62 65 (arrivals minus departures) will lead to slight population growth 60 between now and 2021, while natural growth (births minus 2006 2011 2016 2021f deaths) will have a less significant impact. While net migration Quebec as a whole Mauricie Estrie Chaudière-Appalaches Centre-du-Québec is on an upward trend in these four regions, it will not be sufficient to sustain long-term population growth. Natural f: Institut de la statistique du Québec projections, based on the baseline scenario for 2019 Sources: Institut de la statistique du Québec and Desjardins, Economic Studies growth is forecast to become negative by 2026 in Estrie, Chaudière-Appalaches and Centre-du-Québec. In Mauricie, deaths have exceeded births since 1988. The Labour Markets Will Gradually Recover The labour markets for the manufacturing regions have been In addition, a brief overview of interregional migration hard hit by the public health and economic crisis. Employment shows that many manufacturing regions remain attractive, dropped and the unemployment rate soared to historic highs in particularly Montérégie. By contrast, residents are leaving the the spring after trending downward for the last few years. Centre-du-Québec, Capitale-Nationale and Montreal regions (graph 3). The labour market is gradually making up for lost ground, and job creation has risen in all of the manufacturing regions since July. However, only the Chaudière-Appalaches region has made GRAPH 3 up its losses, even exceeding its pre-pandemic employment level Interregional migration for the manufacturing regions in (graph 5 on page 3). Unemployment rates in the other regions 2018–2019 will return to lower levels by late 2021 (graph 6 on page 3). Breakdown of in-migrants Breakdown of out-migrants Although the labour market is improving, it will take some SECTOR based on the three main based on the three main regions of origin destination regions time, perhaps several quarters, to return to its levels prior to the entre-du-Québe ontérégi entre-du-Québe apitale- COVID-19 crisis. Mauricie Montreal Nationa Montreal ontérégi Montreal ontérégi Montreal Estrie For example, for the wood product and paper industries, the entre-du-Québec entre-du-Québec Chaudière- apitale-Nationa ontérégi apitale-Nationa entre-du- lockdown measures due to COVID-19 slowed down production Appalaches as-Saint-Laurent Québe érégie in sawmills and paper mills and led to plant closures. Since then, Centre-du- ontérégi Mauricie ontérégi Mauricie demand for wood products has rebounded sharply. The summer Québec trie trie months were good for the industry, but a lull is expected by late fall, once inventories are replenished. Sources Institu statistiqu du and Desjardins Economic Studies OCTOBER 7, 2020 | ECONOMIC VIEWPOINT 2 ECONOMIC STUDIES GRA industry recovers, among other factors. With regard to machinery 1 Mon employmen owth manufacturing, which exists in all of the manufacturing regions, VARIAT FROM UG. REGIONS EMPLOYMENT FEB. MAR.2 APR.3 MAY4 JUNE JUL. AUG. the accelerated pace of production is tied to the health of the T . I global economy, the value of the Canadian dollar and the drive Level 4,364.8 4,289.8 4,023.0 3,826.5 3,800.4 3,992.4 4,125,5 - Quebec as (number) for companies in Quebec and elsewhere to automate. whole Varia 0.5 -1.7 -6.2 -4.9 -0.7 5.1 3.3 Level 132.7 130.6 123.0 114.8 113.0 117.3 120.9 - Mauricie (number) Export-oriented businesses will likely have to wait until the Varia 4.1 -1.6 -5.8 -6.7 -1.6 3.8 3.1 Level end of 2021 to return to pre-pandemic levels, despite a weak 167.2 165.9 156.5 152.4 150.7 158.2 159.5 - Estrie (number) Canadian dollar. The difficulties facing the global economy and V 1.2 -0.8 -5.7 -2.6 -1.1 5.0 0.8 Level 224.9 225.8 212.6 208.1 207.4 223.0 230.2 international restrictions on travel and shipping will continue to Chaudière- (number) Appalaches Varia 0.6 0.4 -5.8 -2.1 -0.3 7.5 3.2 take a toll on the free flow of trade.