Alberta’s economy continues to sputter and isn’t expected to exceed pre-pandemic levels until 2023, according to the latest forecast from ATB Financial.
The forecast, however, does predict a return to growth in 2021 after a dismal year that has seen the economy contract by 7.1 per cent.
It anticipates growth of 3.3 per cent in both 2021 and 2022.
Yet all those predictions hinge on two large what ifs.
“Our assumption is that a second wave of the virus will be economically disruptive, but to a lesser extent than what took place in the spring,” reads the forecast.
“However, if the second wave leads to another lockdown in Alberta or other places, this will push GDP lower in 2020 with the negative effects spilling over into 2021. Our forecast also assumes that an effective vaccine will not be widely available until well into 2021.”
The oilpatch factor
The other major factor facing Alberta is the oil price shock that struck with force in April.
While prices and demand have rebounded, the ATB forecast says the recovery remains soft.
“Crude oil and equivalents production in Alberta was 21 per cent (765,000 barrels per day) lower in May (the low point) compared to its pre-shock level in February,” according to the report.
To that end, capital spending has plummeted.
“While still significant at $16.6 billion, capital spending in Alberta’s oil and gas extraction sector is expected to be 30 per cent ($7.1 billion) below the already depressed amount spent in 2019 and 58 per cent ($22.8 billion) below the 10-year average,” reads the forecast.
That spending is expected to remain low through 2021 even if prices and demand rebound.
Rob Roach, the managing director of research for ATB, said the impacts of the pandemic have been far reaching.
“It has been across the board, really no sector has been spared in this,” he said.
“Grocery stores and some certain retail products — apparently hot tubs are flying out of stores — but overall where we really saw the biggest hits was in that service side of the economy where they had to shut down. Restaurants that had to close, of course, the tourism and travel industry, hotels, and they’re still struggling, because, of course, public health restrictions are still in place.”
Unemployment
Those gloomy figures likely won’t help the employment situation in the province, which did add 9,700 jobs in August but is still down by 176,900 compared with the same month in 2019.
Even with those added jobs, the labour market contracted in August compared with July and June, and while the unemployment rate dropped, it was largely due to a decrease in people looking for work rather than a windfall of jobs.
Roach said ATB anticipates the unemployment rate to hold around 11 per cent into next year.
The one shining light in the forecast was the agriculture and agri-food sector.
A strong harvest is expected this year and crops saw growth despite the downturn.
Livestock didn’t fare as well due in part to the outbreaks in meat packing plants and the subsequent lockdowns, but prices and demand have increased and the backlog in processing is shrinking.
Food manufacturing sales were up by seven per cent from last year as of July.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
