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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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+ n: H3 [4 U5 BGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET
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- J6 W4 K% P" kLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.6 q/ n* m: R y
BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.( W! ^0 v! y" r C6 ` V7 ~- x( Y2 H
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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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9 {# |7 M% M: bThat 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.! ]$ z2 u+ ]6 @. A4 _4 S3 C! X# e
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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.”: c3 Z# q' ?" n" {
8 j- s7 h: ]& ]' ^0 T2 u* {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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5 ^. [1 t- A e- X0 i. SAs 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., Q0 E2 n- s) n
/ u6 G" k4 s/ D$ v$ kHowever, 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.
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Canada’s oil capitals are headed for their first major housing correction since 2008, TD warns4 ~* m4 ?4 A2 e h- H, L
Cenovus Energy Inc slashes staff by 15%, freezes pay in ‘challenging times for oil and gas industry’
+ p9 J1 z, G$ a0 O& wThe best oil traders in the business say this rout is not over
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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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+ E5 R3 U! W6 ~* I+ v“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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: I6 m. e5 R. D1 ~# l5 yFor 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.- l$ R2 T3 @4 U7 u {
/ D6 L3 E9 A) E" ]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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6 M1 g2 j" f6 g8 s* J9 d. 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.
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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$53 on Tuesday, a gain on recent sessions., j7 o; F) ~+ W) K, o2 l
l% W- j0 T |# |! v( Y! iMeanwhile, the Canadian dollar closed near the US81￠ level.
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0 E: _9 R- C; E/ x) ^* {3 |The regional shift is also evident in the housing market, where the slowdown in Calgary and Edmonton helped pull down national sales by 3.1% in January from December and by 2% from a year earlier, the Canadian Real Estate Association said Tuesday.4 K8 v2 r6 [' f8 v8 h
/ @ `6 c8 V+ R$ s" \* ^! _9 o( k* s“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.3 M' Y |# U+ ^3 a9 h7 [* g
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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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