Lamphier: Ontario’s ecomomy finally on upswing, which is good news for Alberta

EDMONTON – Murray Edwards is best known as the chairman of Canadian Natural Resources Ltd., one of Alberta’s biggest energy giants.

But the Calgary tycoon has other holdings, too, including a large stake in Imperial Metals, whose Mount Polley gold-copper mine was the site of one of Canada’s worst mining disasters in August.

So far this year, CNRL’s stock has done well, gaining 15 per cent despite the recent pullback in oil prices. Imperial, on the other hand, has been a disaster. Its share price has sunk nearly 50 per cent since Jan. 1.

But Edwards’ top-performing investment is one few Albertans have likely even heard of: Magellan Aerospace, a small Ontario-based manufacturer of components for the aerospace industry.

Magellan’s shares have jumped 47 per cent in value this year, and the stock has more than quadrupled since the end of 2012, closing Monday at $12.50 on the Toronto Stock Exchange.

What’s driving it? Stellar growth in revenues and earnings, both of which are expanding at double-digit rates, thanks in part to the sagging loonie.

Since Magellan — like many Ontario manufacturers — generates a sizeable chunk of its revenues in the U.S., Canada’s faltering currency has boosted the company’s results while making its plants more competitive.

Magellan isn’t unique. Many hard-hit Ontario manufacturers are seeing the fruits of a softer loonie, which has sunk below 90 cents US, down from a 2007 peak of $1.10 US. Some economists say it could tumble to the 83-cent-US range by next year.

Federal NDP Leader Thomas Mulcair, who griped about the supposed evils of Dutch Disease a couple of years ago, blaming Canada’s so-called petrodollar for the hollowing out of Ontario’s manufacturing sector, has gone conspicuously quiet on the topic these days.

That’s probably because Dutch Disease was more fiction than fact in the first place, as is now clear. The impact of Alberta’s growing oilsands output on the loonie was always overblown. It was simply used by eastern politicians to score cheap points by whipping up anti-Alberta — and anti-oilsands — sentiment.

Now that Ontario’s manufacturers are on the upswing, Alberta-bashing seems to have gone out of style, and not a moment too soon.

More importantly, while Alberta is still expected to lead the national parade in terms of economic growth, Ontario should finally start punching above its weight, after years of sub-par growth. And that’s great news for a Canadian economy that has been too dependent on commodities for too long.

“Ontario is poised to be the single biggest beneficiary from the combination of sturdy U.S. growth and a weaker Canadian dollar,� Avery Shenfeld, chief economist at CIBC World Markets, and CIBC senior economist Warren Lovely wrote in a recent report.

“From manufacturing shipments, to domestically driven signposts in retailing, wholesaling and homebuilding, Ontario has seen a notable resurgence, shifting from a perennial trailer to among the better performing regions of the country.�

Although employment in Canada’s most populous province has yet to show signs of robust growth, Shenfeld expects that too to pick up in the months ahead, as the U.S. recovery gains speed.

“Historically, Ontario’s real GDP has had the tightest correlation to U.S. activity. But after years of plant exits, capacity use has actually tightened in the face of demand gains. Ontario needs to cultivate growth sectors, rebuild capacity and win the battle for new facilities,� he says.

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