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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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2 T3 ? u7 P! w" K# \' P+ SGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET2 s; m9 q9 n6 J! C0 b# o5 ^5 _
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Last year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
& j2 U) i- z( F; r- d5 o( ^BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.4 s; m4 o; P* H! e0 ?
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% t1 Z3 N' M' \8 |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.7 H) J$ q$ U$ @1 `7 V1 | k' t3 U
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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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5 z# v, _4 Y0 S6 K& K$ ZIn 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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! S0 k1 L- f! B; ]) ^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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As 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.- o5 u+ s$ h6 q d# u
- V( j; l0 o/ M8 w/ ?: a4 j: OHowever, 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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6 S$ R( Y6 L/ G7 DIn 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., ]: s' C" T- z6 B' c
* I' u/ t) _% r' [7 V. @1 TRelated z+ q0 [5 e! V* \. Z q
Canada’s oil capitals are headed for their first major housing correction since 2008, TD warns; y0 r- p) J8 M+ h- B
Cenovus Energy Inc slashes staff by 15%, freezes pay in ‘challenging times for oil and gas industry’
# Q( q* v7 E. E' |! AThe best oil traders in the business say this rout is not over3 Q$ z) h6 t( ~
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; T2 Y! [1 a7 u5 z a3 D; u# EThe 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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. U7 I( c9 w# n3 R5 F7 Z, @1 |6 k) _% 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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0 j$ W3 C& S% X$ z. B% }2 pFor 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.- `7 M* n9 M, n, T8 D# F
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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.- r- n( m$ F9 \) S D/ N0 y
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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., v* p1 `" U+ K0 Q' E3 Q
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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.1 c/ X6 y O) z& e) h
, \) ?: K- U7 F8 k4 @Meanwhile, the Canadian dollar closed near the US81￠ level.
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9 s7 O# N8 x: [ `: Q/ a1 mThe 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.* z3 _# C- \5 \) K7 c
- Y0 m$ ?) R9 \' ?$ Q, m8 a“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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/ L3 Q( T% K) F1 |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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