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Alberta will sink into recession this year, as provincial fortunes turn amid oil’s collapse, CIBC predicts/ D) V/ C& Q* S" l
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3 O( b6 Y/ _; j7 F4 yGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET! J% W1 o+ I. q8 H/ i
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$ O9 f |* G" M7 ` N4 H0 F. c( k. OLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
5 u; N0 ]- _" MBloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.0 i/ n- ?3 E& r5 N/ J$ C v" e/ e
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# Q, ?' M% S) ?# COTTAWA — 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.
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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.3 H. R" R0 U+ m) n, x, A- l0 u( H
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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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+ f( h9 p2 P% {! G$ L: t8 iAs 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.. X+ c7 M6 [" k& J; h2 u
3 K( h! H5 A3 g. x. }6 K0 UHowever, Newfoundland and Labrador — also reliant on energy revenues — could contract more significantly this year, by 1.3%, and in 2016, by 1%., {) U) d: _' [+ Z* q
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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.: p; e: F0 v! ~' {$ }8 r
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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.
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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.
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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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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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; O" M7 H8 u/ a# g- }- \2 }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.& u ^2 w9 }8 w5 Q' D: W& `
8 N6 z2 Y* B% A. T* L' yMeanwhile, the Canadian dollar closed near the US81￠ level.
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2 X: ~! h0 I0 K4 Y9 GThe 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.0 c* r' L' P0 m' I0 L2 ?
: C1 K9 F3 G% v8 N! }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%.+ A: K! v" i8 k) ?7 Q
5 R+ k0 a' i( J8 U9 C. X, f( n! S“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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