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Alberta will sink into recession this year, as provincial fortunes turn amid oil’s collapse, CIBC predicts
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2 A' K' N o* F% |Gordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET, C5 m! f( v) x7 g
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Last year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
: U7 i6 `: w Q7 e/ ^& o/ W; IBloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants. v! X; W/ f# Q3 M! ^0 M0 M
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% M7 k5 i" n7 t1 V0 FOTTAWA — Consistently low oil prices could dramatically alter the economic landscape of Canada in the coming year and beyond, with Alberta slipping into a “mild” recession as a weak dollar helps lift the manufacturing hubs such as Ontario.5 r8 E# H4 N/ i7 G9 L# d4 K
4 }4 M; S" G& S6 n/ BThat pattern is already being reflected in a slowdown in the oil patch-fueled housing market in Calgary and Edmonton, in addition to an anticipated knock-on increase in unemployment rates in the province.& v1 e: ~& _# M; M9 f2 K2 d
4 {6 h! r, ~/ t" @In a report released Tuesday, titled The Tables Have Turned, economists at CIBC World Markets said recent data show “just how sharply the growth leadership is likely to swing.”
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Most startling, perhaps, is the likelihood Alberta will go from the leading economic power house in 2014 to recessionary levels this year.0 H2 L& I O! ~3 {% H3 n
$ p% D4 ^+ [' Y" P, V“Alberta looks headed for a mild and temporary recession,” said economists Avery Shenfeld and Nick Exarhos, pointing to a 0.3% decline in 2015, compared with 4.1% growth in 2014.
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- K. k6 W) ]+ ^/ L: c: P+ m6 ^; G/ ZAs well, they see growth in Saskatchewan — the country’s other major resources-heavy province — suffering in 2015, managing an advance of only 0.8% this year, after 1% in 2014, but likely avoiding an outright downturn.
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However, Newfoundland and Labrador — also reliant on energy revenues — could contract more significantly this year, by 1.3%, and in 2016, by 1%.
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In contrast, Central Canada “should enjoy a small upside surprise,” thanks mainly to a healthy U.S. economy, CIBC predicts, along with a lift in exports from a weak Canadian dollar.* o( o8 r8 h% a5 c
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The Ontario economy will expand 2.8% this year, up from 2.1% in 2014, and add 2.8% next year, according to CIBC. Quebec should add 2.4% this year and 2.6% in 2016, after a restrained advance of 1.8% in 2014, the bank said. At the same time, British Columbia will continue its mid-2% growth trend.% z3 H$ u+ U$ L
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“That will translate into commensurate shifts in the employment picture, alleviating pressure in some areas — where, if anything, workers are currently in scarce supply — and lowering the jobless rate in Central Canada, where it has been stuck above the national average.”
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1 q [- I+ A/ @* e6 ]For example, Alberta’s jobless rate could rise to an average of 6.8% this year, from 4.7% in 2014, the CIBC said, while Ontario should see its unemployment level fall to 6.6% from 7.2% last year.% _6 f; u1 U4 P) F2 ^" _$ ^) U
- i0 a# b l- o& q: ?CIBC expects overall growth in Canada to be around 1.9% this year, down from 2.4% in 2014, and rising by 2.5% next year.
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Contrast those with the Bank of Canada’s 2.1% outlook for this year and 2.4% in 2016 issued in January, when policymakers surprised markets by cutting their benchmark lending rate to 0.75% from 1%, where it had stood since September 2010.( v8 M' s8 \+ b
9 V1 p6 v" o1 F& V8 OThe central bank’s GDP forecast is based on an average oil price of US$60 a barrel in 2015 and 2016. Crude was trading above US$53 on Tuesday, a gain on recent sessions.* o5 D, H; u( v0 t4 D% Q; b; M
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Meanwhile, the Canadian dollar closed near the US81￠ level.
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3 n; O A0 o. B( j0 oThe regional shift is also evident in the housing market, where the slowdown in Calgary and Edmonton helped pull down national sales by 3.1% in January from December and by 2% from a year earlier, the Canadian Real Estate Association said Tuesday.
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" j' r+ [& i6 D7 A) O# H, y“As expected, consumer confidence in the Prairies has declined and moved a number of potential homebuyers to the sidelines as a result,” CREA president Beth Crosbie said.; p0 p( t* L" i
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Total January residential sales in Calgary were down 35.5% from a year earlier, while Edmonton fell 22.7%, Saskatoon lost 24% and Regina was off 6.9%.
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4 _& |; r2 T' W- @- E8 v“There’s little mystery behind the sudden reversal of fortune for the national figures, as sales in Calgary and Edmonton — and Saskatoon — fell more than 20% from a year ago, in what had been the hottest markets in the country,” said Douglas Porter, chief economist at BMO Capital Markets. |
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