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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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/ b0 i2 X% w4 k5 L. w8 @) {Gordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET
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% C2 m5 G6 o' a4 T# d3 k5 n- n% Q |Last year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
2 Q' I: S5 Z1 v" ZBloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.5 k4 X$ [* q6 t E# Q" ~( i5 m4 Q
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# M5 O7 n8 V0 m0 y: L) D1 T5 C+ GOTTAWA — 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.
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) S. Q* [' ?. S6 m, S+ s* hThat 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.; q5 m/ M5 X6 w/ z5 I
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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.9 K: Z) s7 e( k9 q: A5 i4 s! z
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“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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As 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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+ ^& [* }6 O2 A3 LHowever, Newfoundland and Labrador — also reliant on energy revenues — could contract more significantly this year, by 1.3%, and in 2016, by 1%.2 f7 K7 }6 u5 i* b# g. h( i
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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.' w B: c8 F, d9 t0 V9 ?5 Z: |
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0 t5 Z+ X$ F8 d& xCanada’s oil capitals are headed for their first major housing correction since 2008, TD warns) Y+ h- N/ h0 z! {
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The best oil traders in the business say this rout is not over% l! q r: T: |) ~ q; U
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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.: v% V/ O3 J+ v" `2 G
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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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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.8 \6 F$ A$ c0 ~8 Q1 i) N! X
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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./ g ?, u! c4 T- J' i' {1 _
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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.
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8 J0 T4 o- o/ O( ~. u$ W& wThe 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$53 on Tuesday, a gain on recent sessions.
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Meanwhile, the Canadian dollar closed near the US81￠ level.
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" ~/ v4 V5 G+ H- O% a: U R$ qThe 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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“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.+ Q8 e u- y% N; P9 y6 k; R& D
4 x) z! Y: d+ ~; uTotal 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%.. J# B/ i9 Y6 d
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“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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