ATB sees ‘strong rebound’ for Alberta’s economy, but headwinds persist – Calgary Herald

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Economic growth numbers for Alberta that would normally signal a bullish recovery are being dampened by a gauntlet of fiscal hurdles, says a forecast by ATB Financial.

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The provincial Crown corporation predicts the province’s economy will expand by 6.3 per cent in 2021 and four per cent in the coming year.

But those figures reflect a provincial economy that has further to catch up than other provinces amid the pandemic and an earlier downturn, says ATB, and one whose GDP likely won’t return to pre-pandemic levels until 2023.

Although Alberta’s growth is likely the highest in the country this year, it’s being reined in by COVID-19’s stubborn effect, exploding inflation and supply chain problems, ATB said.

“It’s a really strong rebound but we did lose the most ground in Canada in 2020, so we’re filling back a hole,” said Rob Roach, deputy chief economist for ATB Financial.

Higher energy values, including a benchmark U.S. oil price of nearly US$80 a barrel is helpful, but it’s not generating investment into new production like it has in the past, he said.

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And supply chain problems worsened last week by major storms in B.C. are another hurdle for both imports and exports, said Roach.

“We kind of baked that into our forecast. It continues to be a disruption but hopefully that’ll start to sort itself out,” he said.

While acknowledging one industry forecast is predicting a 27 per cent increase in oil and gas drilling next year over 2021, the owner of one small Calgary-based contractor takes a dimmer view of what lies ahead.

“We’re up from a year ago, for sure, but the phone lines haven’t been lighting up,” said Brian Krausert of Beaver Drilling.

“It’s going to be a slow recovery . . . it’s still a struggle right now.”

He said a dearth of investment, with larger companies using a stronger cash flow from higher energy prices to pay down debt and buy back stocks, is hindering smaller operators such as his.

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A labour shortage fuelled by the uncertainties of a boom and bust economy are another roadblock, said Krausert.

“After a year of sitting around home, you’re seeing people going back home to places like Newfoundland. Sure, you’ll be paid less but you’ll have more reliability of income,” he said.

Only two of his company’s seven drilling rigs are operating, said Krausert, one of them a reflection of the transition to alternative energy.

“We’ve got a rig working on hydrogen right now,” he said, adding that kind of extraction poses logistical challenges.

A Calgary steel supplier is feeling the pinch of distribution bottlenecks and the pains of an evolving economy, said its manager.

“These supply chain issues will go on for a while — last April I was guessing they’d be gone by the fall but they’re in a worse situation now,” said Dan Sekhon of Professional Pipe and Steel Sales.

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The company used to sell more pipe to the energy sector, but that’s gradually dried up, he said.

“Now people import the steel,” said Sekhon, adding the 50-year-old business continues to soldier on with sales to the construction industry.

“Business is never coming back to the way it used to be — we have to temper our expectations.”

ATB Financial says the recovery’s been unequal, with sectors such as the hospitality industry coming back slowly after being hit harder, while others such as retail and cannabis have proven stronger than before the pandemic.

Alberta’s biggest cannabis retailer, High Tide, opened 17 stores in Alberta this year and is looking forward to further growth, aided by newly announced provincial policies allowing for home delivery and the sale of branded items, said company spokesman Omar Khan.

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“Cannabis is a big contributor to the Alberta economy and the Alberta government has realized that,” said Khan.

Since late September 2020, nearly 200 new cannabis stores have been approved in Alberta, bringing the total to 721.

Inflation, which at more than four per cent is now at its highest point in 18 years, is proving another drag on the province’s economic recovery by hurting consumer spending and upping interest rates, said ATB’s Roach.

“It raises the cost of doing business and it just creates uncertainty,” he said.

Food banks in the province have reported massive increases in use over the past year and Roach pointed to a stubbornly high provincial unemployment rate of 7.6 per cent.

Two months ago, TD Economics predicted the province’s economy would grow by 4.6 per cent next year and 3.8 per cent in 2023, a forecast tempered by the pandemic’s fourth wave that’s since receded.

One of the strengths driving that is momentum in Alberta’s housing sector, said the think-tank.

“Alberta has seen a solid revival in housing activity this year, with home resales expected to rise at the strongest pace in the country. Housing starts are also coming in strong, providing a boost to the construction industry,” said TD Economics.

BKaufmann@postmedia.com

Twitter: @BillKaufmannjrn