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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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Republish Reprint
% U c' ^: D. n# n. W& N) uGordon Isfeld | February 17, 2015 | Last Updated: Feb 17 6:00 PM ET
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g1 z& {' [; ^. k6 ^6 tLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
+ r2 \4 C5 b8 u b" p; A1 yBloombergLast year Alberta lead Canada's growth, but the plunge in oil prices has turned the tables on the nation's energy giants.
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$ ]4 b( Q6 b/ xOTTAWA — 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.
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N* ]* }$ V/ n. @5 ZThat 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.% W8 x. `% G0 J
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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.
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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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/ D8 i& ?; T- p5 V- 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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9 j! m! p! ]0 U$ EHowever, 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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3 c/ X b: k/ mIn 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.+ Y- d; S$ g. V. c
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Related, }4 _( ^: M H# Q4 M
Canada’s oil capitals are headed for their first major housing correction since 2008, TD warns
% o6 U4 q8 `6 nCenovus Energy Inc slashes staff by 15%, freezes pay in ‘challenging times for oil and gas industry’
2 }0 i+ r1 J5 a$ dThe best oil traders in the business say this rout is not over
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; p5 W- V1 j7 R5 B2 uThe 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.+ M7 @ Z" N# Z3 z* A
- N5 C$ A2 H; C# m4 M$ Y: i3 }“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.”/ q9 P/ W! [/ t
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For 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.& B5 ~- {4 }: J5 M' m# r
/ j6 i0 v1 h1 lCIBC 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.! e! l* C' j1 @1 `1 a j* h+ H
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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.
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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$53 on Tuesday, a gain on recent sessions.
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Meanwhile, the Canadian dollar closed near the US81￠ level.8 Z4 ?8 [7 O5 e" b
# `$ a1 n9 \) ]& TThe 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.
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" @5 e& M; C9 Q2 P( f( V+ b1 F“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.8 N+ q, o3 n9 S# | y
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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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8 d2 T5 C. B& E, x( f“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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