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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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1 w, m% F) f% t* f& p5 OGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET) ~( a6 V& {6 i
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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.# S8 U* @. g& K: d
BloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.) A4 c; S( m" r' \, c, M+ 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./ y% G' |& c5 N
/ c4 U9 ] N- H0 @) 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.9 X, a( Q+ W2 ?- n3 i( s. f2 y
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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.6 t5 w. a4 r* f4 F7 U* T7 F) q2 J
# I- a2 Z# \- }: Q9 d“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.) @5 e O5 O/ X
# X( h6 u3 \1 UAs 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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However, Newfoundland and Labrador — also reliant on energy revenues — could contract more significantly this year, by 1.3%, and in 2016, by 1%.2 M( W* _/ c! T9 x9 M) Y
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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.2 H9 l: F/ m/ C
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* @: J/ Q; Q g. ?Canada’s oil capitals are headed for their first major housing correction since 2008, TD warns
) g: }- Z, e! D- t$ c# WCenovus Energy Inc slashes staff by 15%, freezes pay in ‘challenging times for oil and gas industry’6 L2 T A- ^; P) c8 [
The best oil traders in the business say this rout is not over% V" q+ Z7 |: d$ s; C
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# c. Y8 e' h& t3 W0 HThe 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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& z; t8 ^1 u2 Z0 X+ l/ h“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.”: \, S6 p. @" ?& ~- q2 K& w+ w8 ^
6 `$ n# k, y" ^4 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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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.) u( p: b0 X- @9 g3 w
. m9 ~: X: |9 K$ u2 pThe 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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Meanwhile, the Canadian dollar closed near the US81￠ level.- H0 w- u* T! b/ i- j0 }: v
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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.7 c1 I7 f8 B5 G8 W6 l
$ Q3 q# D4 c2 ^& m- G0 B“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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2 o9 k2 n$ C1 `0 D$ t- |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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J2 {+ C: L8 z+ 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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