With Alberta’s surging economy, Danielle Smith’s blame-Ottawa strategy is in question
Todd Hirsch was the Calgary-based chief economist of ATB Financial and is the author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.
Alberta Premier Danielle Smith was elected to lead the UCP last fall by blaming Ottawa for everything. Ottawa has strangled our energy sector! Ottawa has destroyed our economy! Ottawa has robbed Alberta’s wealth and has given it all to Quebec! (These aren’t direct quotes, but they certainly come close.)
Yet now making such claims is embarrassing when, in fact, Alberta’s economy is roaring ahead and leading the country in growth.
As Albertans march to the voting booths this spring, the brimming provincial economy is creating a Catch-22 dilemma for the incumbent United Conservative Party and its messaging.
The Conference Board of Canada is forecasting Alberta to lead all Canadian provinces in GDP growth in 2023 and 2024. According to its most recent projection, released last fall, Alberta will expand by 3.5 per cent this year and 2.4 per cent in 2024.
More up-to-date forecasts by the major banks suggest somewhat lower growth rates than the Conference Board, owing mostly to the hikes to borrowing costs since last autumn. Still, almost all of the major forecasting teams are suggesting Alberta will lead the country in economic expansion.
Higher oil prices have generated a massive windfall surplus for the provincial government. And a tech boom is helping to fill up the enormous gaps in commercial real estate. Since the downturn in energy prices going back to 2015, vacancy in Calgary’s shiny office towers spiked to 30 per cent. This is now falling.
One of the most reliable indicators of economic good times – interprovincial migration – has kicked into high gear. In the third quarter of last year, nearly 33,000 people from other provinces moved to Alberta, while fewer than 14,000 left, leaving a net increase of more than 19,000. In perspective, Alberta’s net interprovincial population gain has been higher on only one occasion (in the third quarter of 1980). Most of the current net increase is because of people leaving Ontario (plus-8,645) and British Columbia (plus-5,960).
For all of the economic good news and an election less than four months away, you’d think the governing UCPs would be celebrating. But this time around, the economy is creating an interesting plot twist.
The UCP would love to both take credit for the economic renaissance, and at the same time blame Prime Minister Justin Trudeau for the economic catastrophe. But the two assertions cannot both logically hold true.
For sure, there’s almost no one in Alberta who would suggest the federal government hasn’t repeatedly fumbled the ball. Even Alberta’s opposition NDP is saying that Ottawa’s “Just Transition” plan to evolve jobs in the energy patch needs to be scrapped and rethought with input from Alberta. And the mention of Bill C-69, which overhauled Canada’s environmental assessment laws, will send many Albertans into a fit.
But with the fastest growing economy, highest average weekly wages and strongest inflow of migrants, most Albertans actually aren’t that angry about the economy. Most surveys show voters in the province are far more concerned with the state of the health care system than they are furious about the economy.
That wasn’t the case during the last provincial election. In 2019, Albertans were suffering through a fourth year of recession. The slogan “Jobs. Economy. Pipelines” swept Jason Kenney’s newly minted UCP into power that year.
But in 2023, the slogan “Trudeau has destroyed our economy!” simply won’t do. Albertans are smarter than this. The economy will play a role, as it always does. But the UCP needs to be extremely careful playing the economy card.
Charting the Global Economy: Fed, BOE, SNB Push Ahead With Hikes
(Bloomberg) — The Federal Reserve, Bank of England and Swiss National Bank all proceeded with expected interest-rate increases this week, reinforcing their commitments to curb inflation despite turmoil in the banking sector.
Policymakers in the US and UK hiked by a quarter point while those in Switzerland opted for a half point. All three signaled more increases could be in store.
The UK was especially under pressure to tighten policy after a report earlier in the week showed consumer prices advanced 10.4% in February, surpassing all estimates in a Bloomberg survey and bucking economists’ expectation of a slowdown.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Iceland’s central bank extended western Europe’s longest policy-tightening campaign with a full percentage-point increase, while the Philippine central bank shifted to a smaller hike. Norway, Taiwan and Nigeria also kept hiking. Officials in Turkey left rates unchanged, as did those in Brazil despite pressure from the government for looser policy.
The rush of layoffs that began late last year isn’t letting up, marking the worst start to a year since 2009, with nearly 52,000 jobs lost in one week in January alone. Since Oct. 1, executives across sectors have sacked almost half a million employees around the world, according to a comprehensive review of layoffs by Bloomberg News.
History remembers Paul Volcker as the slayer of inflation, and Ben Bernanke as the crisis firefighter. Jerome Powell is in danger of having to play both roles at once — or, what may be worse, to choose between them.
Powell and his colleagues are expecting a sharp dropoff in economic activity through the rest of 2023 — at least, that’s the implication from new economic projections they published this week.
Rent increases for US single-family homes eased for a ninth straight month in January, pushing the annual rate to the lowest since the spring of 2021, according to CoreLogic. All 20 major metro areas tracked by CoreLogic posted single-digit annual rent increases, for the first time since late 2020.
UK inflation accelerated unexpectedly in February for the first time in four months, keeping the BOE on course to raise interest rates. Food and non-alcoholic drink prices soared 18%, the fastest pace in 45 years, while core and services inflation also picked up.
Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede. The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global.
China’s population is emerging from a massive virus wave unleashed by the rapid reversal of Covid Zero in mid-December. People are planning trips, dining out and returning to shopping malls. Still, residents of the world’s second-biggest economy aren’t splashing out like they used to.
South Korea’s early trade data showed a deepening slump in exports as global demand for semiconductors remains weak and China’s reopening is yet to generate any boost.
Singapore’s core inflation, a key barometer for the central bank, kept its 14-year-high pace in February as officials weigh fresh threats to the global economy amid the Federal Reserve’s resolve to stay the course on tightening.
Sri Lanka clinched a $3 billion bailout loan from the International Monetary Fund after six months of negotiations. Now comes the harder part: getting a debt restructuring agreement and seeing through monetary policy and tax reforms.
—With assistance from Mathieu Benhamou, Ruchi Bhatia, Matthew Boesler, Libby Cherry, Jo Constantz, Jennah Haque, Jinshan Hong, Michelle Jamrisko, Sam Kim, Phil Kuntz, Karen Leigh, Rich Miller, Tom Rees, Zoe Schneeweiss, Naomi Tajitsu, Alex Tanzi, Kevin Varley, Alexander Weber and Karl Lester M. Yap.
Euro-Area Economy Strengthens More on Service-Sector Surge – Financial Post
(Bloomberg) — Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede.
The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global. Manufacturing output broadly stagnated, however, only supported by a backlog of orders as demand continued to fall.
“Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” said Chris Williamson, an economist at S&P Global.
Sentiment in Europe has been improving as it became clear that the region would avoid worst-case scenarios for access to natural gas predicted after Russia cut off supplies to the bloc. Recent turmoil in the banking sector has cast some doubt on how the global economy will develop, though European officials have sounded confident that the sector can withstand any fallout.
While activity improved in both Germany and France, the strongest performance came in the rest of the 20-nation euro area.
What Bloomberg Economic Says…
“The euro-area composite PMI survey for March suggests the economy is beginning to emerge from a period of stagnation and holding up well under the weight of higher interest rates. While monetary policy works with long and variable lags and choppy waters may still lie ahead, the resilience of the economy should allow the hawks at the European Central Bank to succeed in pushing for more interest rate increases”
—David Powell, economist. For full analysis, click here
Inflation is still running far above the European Central Bank’s 2% target, however, with underlying data becoming the key focus for policymakers. While price gains continued to moderate in March, they remain elevated by historical standards, according to S&P Global.
“Such stubborn inflationary pressures, fueled primarily by the service sector and rising wage costs, will be a concern to policymakers and suggests that more work may be needed in terms of bringing inflation down to target,” Williamson said.
The jobs market also remained resilient. Employment growth reached a nine-month high, with acceleration seen especially in services in line with rising demand.
Firms’ confidence in the business outlook dipped, though it remained well above levels seen in late 2022. That could be linked to concerns over uncertainty caused by banking-sector stress and the impact of further increases in interest rates, S&P Global said.
The composite PMI reading for the UK edged lower to 52.2 in March from 53.1 the previous month, suggesting the economy has avoided a recession for now. British companies are the most confident they’ve been since the start of Russia’s invasion of Ukraine.
Data earlier revealed activity in Japan’s services sector edged up to the strongest in almost a decade as the return of Chinese tourists boosted demand. The US number due later on Friday is expected to be below 50.
—With assistance from Mark Evans, Joel Rinneby, Tom Rees and Zoe Schneeweiss.
(Updates with UK PMI data in 10th paragraph.)
Economy headed into a ‘Bermuda Triangle’ financial crisis: Nouriel Roubini
- The economy is headed into a “Bermuda Triangle” of risk, economist Nouriel Roubini warned.
- Roubini pointed to three stressors facing the US economy.
- He sounded the alarm for a stagflationary debt crisis and a severe recession to hit the US.
In a recent interview on the McKinsey Global Institute’s “Forward Thinking” podcast, the top economist warned that the economy was risking another financial crisis as central bankers continue to tighten monetary policy.
Federal Reserve officials raised interest rates another 25 basis-points this week, and have hiked rates 475 basis-points over the last year to control inflation. That marks one of the most aggressive Fed tightening cycles in history, and could place the economy under three different kinds of stress, Roubini warned.
First, high interest rates could easily overtighten the economy into a recession, experts say, which reduces income for households and corporations.
Second, high interest rates means firms are battling higher costs of borrowing and waning liquidity, which weighs on asset prices. Last year, US stocks plunged 20% amid the Fed’s rate hikes, with warnings from other market commentators of an even steeper crash in equities this year.
Finally, high interest rates are pressuring the mountain of debt, both private and public, that was amassed during the years of low rates, Roubini said. He pointed to bankrupt “zombies”, which include households, corporations, and governments.
“It’s got like, a Bermuda Triangle. You have a hit to your income, to your asset values, and then to the burden of financing your liabilities. And then you end up in a situation of distress if you’re a highly leveraged household or business firm. And when many of them are having these problems, then you have a systemic household debt crisis like ,” he warned.
Roubini, one of the experts who called the 2008 subprime mortgage crisis, has repeatedly sounded the alarm for another crisis to strike the US economy. The scenario he envisions combines the worst aspects of 70s-style stagflation with something like the 2008 crisis, with a severe recession, stubborn inflation, and mounting debt levels bludgeoning economic growth.
He and other top economists have criticized the Fed’s aggressive rate hiking regime over the last year, and some experts have called central bankers to stop raising interest rates entirely out of fear of “breaking” something in the financial system.
Signs of stress are mounting, the most recent being the failure of Silicon Valley Bank. But pausing interest rates could panic investors and lead to a resurgence of inflation, meaning central bankers are powerless no matter what they do with rates, Roubini has said previously.
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