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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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0 h. t ]4 L H/ oGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET
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, |& C3 V5 U! ZLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
7 ~4 ^- v' [) {% T. {BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.4 j4 y3 C% u% s# h" R
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/ }& u( k+ o9 q3 n' y/ |2 R+ bOTTAWA — 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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That 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." w* k% @/ ?* q
' V m; e- M1 O, \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.”- q4 {! _5 }5 u* d/ M
3 u7 `2 s+ H% qMost startling, perhaps, is the likelihood Alberta will go from the leading economic power house in 2014 to recessionary levels this year.0 s+ v) m I+ y, F$ J5 X- T" C, E- Z( d
$ U* {8 m+ [6 b- T# l“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.+ g7 @: h& x& L! a
+ V. F8 p# P/ j/ k8 { JAs 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%.: T; ^# P8 t' u! I; J" J0 m& k
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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.
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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.% X9 S6 j7 s1 n% e: P
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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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], g: \" ]' P2 n+ NFor 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.- T" \' B# A' H* i/ t
! `9 V3 R" I" f, |3 eCIBC 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.
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9 z6 ?8 E* p$ l( A$ ~8 G1 u0 L0 eThe 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$53 on Tuesday, a gain on recent sessions.+ @( v0 X% ]6 ^
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Meanwhile, the Canadian dollar closed near the US81￠ level.
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& c" n R2 W3 F; g( @7 X. aThe regional shift is also evident in the housing market, where the slowdown in Calgary and Edmonton helped pull down national sales by 3.1% in January from December and by 2% from a year earlier, the Canadian Real Estate Association said Tuesday." z! L( m5 n9 V* u3 l' U0 b
% w- |& P" G3 G* w“As expected, consumer confidence in the Prairies has declined and moved a number of potential homebuyers to the sidelines as a result,” CREA president Beth Crosbie said.2 k5 v! N2 v* n& z$ c
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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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