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Alberta will sink into recession this year, as provincial fortunes turn amid oil’s collapse, CIBC predicts( z0 b# @! o5 ?: @- ]
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Gordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET% M! @ e$ V1 c9 P
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- S! R( e% f& `* K0 TLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
5 d4 b# p( a+ W: p0 sBloombergLast 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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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.
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H3 ?% ^# M& E; ^9 B( x. T1 OThat 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.”7 ] X; J, _+ y: f8 L5 }
' o7 h5 `8 C* \' ZMost 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.* s0 ~% _' c& V0 D) Z, D9 d! Q s
$ K4 k! T! |( `4 d1 ^" B9 ]. l: d( FAs 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.3 g/ v- T. P+ L- P2 w, k( L" O
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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%.1 u2 O, ^ Z( Z/ N& }( n* [: A; \
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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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( G& l9 m$ R, p' p- s( |Canada’s oil capitals are headed for their first major housing correction since 2008, TD warns. P4 v- b$ c0 x& }! W2 y6 ?; z
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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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4 m+ L& y4 I* HFor 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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5 Z6 z k0 d/ T' s4 }% i/ SCIBC 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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$ @) t6 S- b: N% NThe 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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_ O0 K0 v7 Y0 u" l' g( xMeanwhile, the Canadian dollar closed near the US81￠ level.
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* B# Z d+ P( k! |! P& @8 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. r- x6 D1 D5 ~5 T# Q
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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.
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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%.# ~# D% q7 c9 h* z7 a, L& r
: I1 h+ i' E2 S5 K“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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