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Alberta will sink into recession this year, as provincial fortunes turn amid oil’s collapse, CIBC predicts4 s: ?& N6 U) p5 K+ R X7 N: I
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Gordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET9 D7 c. x! H9 \& I; O: m
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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./ a9 W3 b$ w$ b" m% I- A
BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
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+ p% h5 N4 R8 p4 v& 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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# m4 U9 K" b1 H- r, d5 g$ Q+ _7 UThat 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.
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! _2 N, `( Y) U1 qIn 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.”7 A# B+ U1 p+ I/ g w
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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.
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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.! V3 D1 R1 J; P& s" r3 M( Z
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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.5 t) u6 G5 r: k; p2 Q( Y! j. @
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4 w' }: [1 G; z; ^2 ]1 i. _+ v, qCanada’s oil capitals are headed for their first major housing correction since 2008, TD warns
( `% }7 q u' b8 ^Cenovus Energy Inc slashes staff by 15%, freezes pay in ‘challenging times for oil and gas industry’
6 R; z* r2 {" n3 k6 [! VThe best oil traders in the business say this rout is not over2 c9 s* q+ q% L3 {( r5 W% H
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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., O% o/ N& P6 T6 c& }& S! \- }! I
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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.1 W) S! Y1 g" d7 p( F2 h7 P# W
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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.
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@7 ]+ O5 o, d& g' ZContrast 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 2010.8 Y1 J# P4 j, d6 q* M4 Y% _
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The 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$53 on Tuesday, a gain on recent sessions.4 {( \/ [' P+ g, X$ o* V( @
- u' J9 x4 U5 |( ?: z3 lMeanwhile, the Canadian dollar closed near the US81¢ level.& D# d9 h; `* E6 S
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The 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., L, B) G2 G3 h1 v% c/ u: I
: @% \+ a" i6 @4 H0 t, m. ?“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.
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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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“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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