Economic growth in Alberta will remain well ahead of the rest of the country, according to a BMO Economics report.
“Growth in Alberta’s population, employment and retail sales, among other indicators, are running head-and-shoulders above the rest of the pack,” said Robert Kavcic, senior economist, BMO Capital Markets. “Indeed, the province remains on pace to see 3.5% real GDP growth this year. Inflation is also moving higher in the province, with consumer prices excluding food & energy up 2.5% year over year in May, just off a 6-year high.”
Robert Hayes, senior vice president, Alberta & NWT, BMO Bank of Montreal, notes that commercial clients are clearly optimistic about business dynamism in Calgary and Alberta as a whole.
“Oil and gas companies and agricultural firms dominate the scene, but we see significant opportunity for firms that support the industry spinoffs. This particularly applies to the engineering sector, where our clients are experiencing considerable growth,” added Hayes. Strong tourism, including record-setting attendance at this year’s Calgary Stampede, also point at a healthy economy.
Alberta’s economy is hot and inflation is warming up, but it’s not yet at the point where massive upward wage and price pressure in the province will debilitate the economy, according to Kavcic.
“In many areas, such as housing, commercial real estate and the labour market, the supply side has had much more time to respond to strong demand than during the overnight boom experienced through 2007 — and that might be a good thing. Still, businesses and policymakers will have to remain mindful that the province is effectively now on an island with respect to economic growth and potential inflation compared to the rest of the country.”
Labour and Housing Markets
Alberta’s jobless rate sits at 4.6% — the second lowest in Canada and down from 7.5% at its post-recession high. “Interestingly, the jobless rate has held steady over the past two years, even as growth has remained strong, and wage growth is relatively tame at 1.9% year over year,” noted Kavcic.
“Since the prior boom, 350,000 migrants have helped relieve the strain on the labour market, and strong labour force growth is keeping the jobless rate from sinking and wages spiralling higher.”
On the housing side, a sudden population surge had homebuilders behind the curve last decade, which propelled rents and prices skyward. “There’s little doubt that both are accelerating again, particularly in Calgary where the MLS Home Price Index has surged more than 10% in the past year,” said Kavcic.
“Calgary’s market clearly remains the strongest among major Canadian cities, even as Toronto is putting forth its best effort, and recent economic and demographic trends should support continued gains.”