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Alberta’s Economic Prospects and Regional Impacts. Presentation to CAEP REDA March 3, 2011. Alberta’s Economic Prospects and Regional Impacts. CAEP Presentation March 3, 2011. Is World Economy’s Recovery Sustainable?.
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Alberta’s EconomicProspects and Regional Impacts Presentation to CAEP REDA March 3, 2011
Alberta’s EconomicProspects and Regional Impacts CAEP Presentation March 3, 2011
Is World Economy’s Recovery Sustainable? • Uneven global recovery, with widespread financial and fiscal turbulence • Weak recovery in Europe: ongoing financial risks due to Greek and Irish crises; German economy doing very well • Modest recovery in North America; new round of quantitative easing in US improves US outlook • Sharp recovery in emerging markets, led by China, India and Brazil (but some risk for China) • Very high government debt: Japan, Ireland, Italy, US, UK • Removal of fiscal and monetary stimulus needs to be done carefully • Very weak labour and housing markets in US • Political instability in Middle East may disrupt oil supplies
Canada in Better Shape than US? • Canada’s recovery is built on strength of domestic economy, but stronger revival in US employment is key to maintaining momentum in 2011 • Economic growth was weaker than expected in Q3, but rebounded in Q4 ’10 • Budding core inflation, higher energy prices and rising sales taxes have prompted BoC to start lifting rates • High commodity prices will keep Loonie strong • Real GDP growth of 3.1% in ’10; 2.7% in ’11 as domestic economy and government spending cools
Alberta on the Rebound • Alberta is now out of recession: high energy prices; global recovery; surging oil investment • Alberta’s GDP fell by 4.5% in 2009: falling investment and exports; large 20%+ declines for manufacturing, agriculture, construction • Strong employment gains in 2nd half ’10 and Jan ’11 • Budget: Alberta GDP up 3.5% in ’10 (consensus +3.2%) • Until 2008 the economy was growing at rates well beyond its capacity • Recent slowdown has eased pressures on housing and infrastructure and reduced inflation
Current Alberta Indicators • Building permits up 2.1% in ’10 • Housing starts up 36% in ’10 • MLS sales down 14% • Retail sales up 5.5%; car sales up 9.3% • Oil production up 6.5%; gas production down 5.5% • Employment down 0.4% • Manufacturing sales up 10.9% • Farm cash receipts down 5.9% • Exports up 11.3% (high oil prices)
Real GDP GrowthAlberta vs. World, Canada and U.S. Sources: Statistics Canada, Bureau of Economic Analysis (historical); average of recent forecasts by Conference Board of Canada, and major Canadian banks; EIU (World)
Unemployment RateAlberta Economic Regions(January 2011) Wood Buffalo – Cold Lake 4.5% Athabasca-Grande Prairie 6.1% Edmonton Region 5.7% Red Deer Region 5.2% Banff-Jasper Rocky Mtn. House 5.9% Calgary Region 5.9% Camrose-Drumheller5.0% Lethbridge-Medicine Hat 4.3% Provincial Rate 5.6% Note: regional and provincial rates are 3-month averages Source: Statistics Canada, Labour Force Survey Source: Statistics Canada, Labour Force Survey
Industry Sector Prospects • Rising value of the Canadian dollar may limit export growth to the US, but US outlook has improved • Oil prices are relatively higher than natural gas prices; long-run oil prices driven by growth in China and India • US shale gas means gas prices will stay low, but domestic demand for gas is on the rise (oilsands/power) • High oil prices should stimulate investment in 2011 • Agriculture prices have rebounded: growing demand in Asia and biofuels; COOL impacting livestock/meat • Forestry prices are recovering, except for OSB prices
Data and Analysis for Central Alberta Region(New REIR reports on http://www.albertacanada.com/about-alberta/regional-economic-indicators.html)
Differences in Geography CAEP vs Central Region • Part of Central Region;non-member CAEP:Acme; Botha;Cremona; Delia; • Linden; Morrin; Munson; Starland County; Ponoka County • Member of CAEP; not part of Central Region: • Castor; Halkirk; Paintearth
Population Estimates Source: Statistics Canada
Population Estimates Source: Statistics Canada
Age Pyramid • 20-40 year-olds have smaller share in CA than in AB • 0-20 have larger share • 44+ identical shares Source: Statistics Canada
Regional Labour Force • In 2009, regional labour force and employment continued to increase, but likely declined in 2010 • Unemployment rate: 6.7% in ’09 - up from 3.8% in ’08; declined in 2010 • Participation Rate: 72.7% (labour force/population 15+) • Largest sectors in ’09: Retail/Construction (about 20,000 each); Healthcare/Oil and Gas (15,000 to 20,000) • Sectors with >10,000: Agriculture; Manufacturing; Other Services; Education • 4,800 workers received EI in ’09 (up from 1,500 in ’08) • EI down 42% Q4 ’09 to Q4 ’10; AB down 31%
Regional Agriculture • Number of farms: 10,477; 21.2% of AB • Farm cash receipts: $1.75 billion; 17.7% of AB • Land in crops: 3.8 million acres; 15.8% of AB • Canola: 631,000 acres; 15.5% of AB • Barley: 879,000 acres; 21.5% of AB • Wheat (incl. durum): 824,000 acres; 12.7% of AB • Value of livestock: $970 million;19.4% of AB • Cattle and calves: 1.21 million; 19.0% of AB • Hogs: 599,000; 29.2% of AB
Beef Industry Consolidating • Herd reduction: US 3.9% down between ’07 and ’11 • Canada and Alberta down 17% between ’05 and ’11 Source: Statistics Canada
Pork in Precarious State • Shrinking herd - Losses ongoing • Smaller industry likely - Exchange rate key Source: Statistics Canada
Regional Agriculture Sources: Statistics Canada and AAFRD
Regional Manufacturing • Estimates for Census Division 8 (2/3 of CA population) • In 2008, manufacturing shipments $7.5 billion, up 5.4% from ’07 • CD 8 accounts for 10.6% of Alberta manufacturing • Employment 6,500: 4.5% of Alberta manufacturing jobs • Largest sector: chemicals ($5.6 billion or >50% of AB) • #2 sector: food ($630 million or 6% of AB) • #3 sector: O&G machinery ($300+ million or 5% of AB) Sources: Statistics Canada
Regional Energy • Gas production: 30.8 billion m3 in ’09, down 5.6% from ’08 • Oil production: 3.2 million m3 in ’09, down 5.3% from ’08
Regional Energy • 1,189 wells spudded in ’09; down 52% from ’08 • 16.4% of # of Alberta spuds
US Shale Gas Cause of Weak Gas Prices Source: U.S. Energy Information Administration
Number of Businesses by Employee Size Source: Statistics Canada’s Business Register
Number of Businesses by Industry PSTS: Professional, Scientific and Technical Services FIRE: Finance, Insurance and Real Estate Source: Statistics Canada’s Business Register
Accommodation Sector • Region had 84 accommodation properties with 4,500 rooms • Average occupancy rate in the region was 47% • Average room rate was $90
Personal Income Source: Alberta Finance & Enterprise • Average individual income: $34,500 in ’07; #6 of 14 regions • Income grew 42% ’03 – ’07; #5 of 14
Consumer Prices • Regional price levels are lower than the Edmonton benchmark level • Shelter costs are also lower than in Edmonton
Investment • CA housing starts: 1,076 in ’10 up from 1,055 in ’09 • Housing units: 1,594 in ’09; down 36% from ’08 Source: Statistics Canada and CMHC
Building Permits • Building Permits: $442 million in ’09; down 45%
Conclusions • World economy has emerged from recession • Outlook is for slightly weaker growth in ’11 – many risks • US economy needs to gradually unwind stimulus • Alberta expected to see return to strong growth over medium term • Oil prices at high levels, but gas prices are weak • Rising US shale gas production is a threat • Forestry prices are improving; strong agricultural prices • Livestock inventories continue to decline (COOL) • May need to look at other foreign markets for forest and agricultural products, e.g. Asia • Weak US $ is a threat