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Alberta will sink into recession this year, as provincial fortunes turn amid oil’s collapse, CIBC predicts/ U9 Z/ f# T6 d, j# X8 Q* W
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$ k) |8 s* F" V+ }: v3 V- c4 H: ?Gordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET
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7 U, P% |) H" Q8 fLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.3 y3 A1 `: [# ?% r6 M
BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.) e: r, r" o' B$ {4 @( R# M$ l' m2 e
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OTTAWA — 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.) K/ {0 j" Y) h2 G/ ?/ V6 c. |/ Q4 P
+ g$ W) L4 \) t# U4 j0 kThat 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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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.”( V- H9 D* Q% _
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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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4 i# p5 |% p4 H, e% d5 c+ _“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." [; ~! d# Q7 L. t# X& E& l
) D0 X+ O) v- s/ v- u+ WAs 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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0 ?. z. @0 p: M- N* F5 XHowever, Newfoundland and Labrador — also reliant on energy revenues — could contract more significantly this year, by 1.3%, and in 2016, by 1%.3 |6 Y3 R0 K, ]. [2 r- Z4 ^
5 D! S1 \ t; B& s5 A9 s" c Y- lIn 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.; ?: j8 Y& F/ {4 e( W7 Y
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, t0 J! v/ U t7 ]; dCanada’s oil capitals are headed for their first major housing correction since 2008, TD warns$ u% S! C0 h' m- L4 G
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* f2 Y9 W! f3 d/ wThe best oil traders in the business say this rout is not over- ]. F1 R2 C. R( G1 F. L1 G
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( `( w% r4 z, yThe 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.' c( c+ S% \) q- y/ }
5 x; o- Y0 s- `/ t“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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; W! ?: L% w! a+ rFor 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.
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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.% _8 o; S, J# h6 `9 W' c
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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.; y0 t8 z% u( ?0 p# z, o
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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$53 on Tuesday, a gain on recent sessions.$ Q P1 P, M" n! j( o T
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Meanwhile, the Canadian dollar closed near the US81¢ level.
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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.
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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.4 A. I2 n2 B! i) ?# e
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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%.+ O. M, T3 V/ u! J. \0 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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