Alberta's Economic Outlook Catherine Rothrock Chief Economist - - PowerPoint PPT Presentation

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Alberta's Economic Outlook Catherine Rothrock Chief Economist - - PowerPoint PPT Presentation

Mar 23, 2023 1.71k likes •2.14k views

Alberta's Economic Outlook Catherine Rothrock Chief Economist Alberta Treasury Board and Finance January 30 th , 2020 Global Economy in Perspective 2 Global economic outlook to improve Global economic growth forecast Title Actuals Oct-18

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Catherine Rothrock Chief Economist Alberta Treasury Board and Finance January 30th, 2020

Alberta's Economic Outlook

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Global Economy in Perspective

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Global economic outlook to improve

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Global economic growth forecast

Source: International Monetary Fund, World Economic Outlook Database

2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 Title Actuals Oct-18 Apr-19 Oct-19 Jan-20

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Global manufacturing finds a bottom?

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Purchasing Managers' Index (PMI), PMI >50 indicates an expansion

Source: Bloomberg

46 48 50 52 54 56 58 (index) World US Emerging Markets

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Labour markets remain strong

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Unemployment Rates in Select Advanced Economies

Sources: Statistics Canada, U.S. Bureau of Labor Statistics, Statistical Office of the European Communities, Japan Ministry

  • f Health, Labour and Welfare and Haver Analytics

1 2 3 4 5 6 7 8 9 10 11 12 13 14 (%) Canada UK* Germany Japan US

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Monetary policy accommodative

Central Bank Policy Rates

Sources: Bank of Canada, Bank of Australia, Bank of New Zealand and Federal Reserve Board

0.0 0.5 1.0 1.5 2.0 2.5 (%) Canada US

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The Loonie improving from May’s low

Canadian dollar exchange rate

Source: The Bank of Canada .

72 73 74 75 76 77 78 79 80 81 82 US Cents/$C USD/CAD

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Muted outlook for oil prices

West Texas Intermediate

Source: Alberta Treasury Board and Finance, f-forecast

20 40 60 80 100 120 (US$/bbl)

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Alberta's Economy in Perspective

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  • Growth forecast to pick up after near-term weakness

– Activity in the province stagnating following mid-year rebound. Real GDP is forecast to slow to 0.6% in 2019. – Real GDP set to expand 2.7% in 2020 and 3% over the medium term.

  • Solid exports and strengthening domestic demand to underpin growth

– Oil production, manufacturing expansions to support exports. – Business investment set to grow.

  • Prolonged recovery

– Muted outlook for oil prices; investment to remain below 2014 levels. – Full recovery in real GDP in 2020, nominal GDP in 2021. – External risks remain elevated.

Alberta economy heading into expansion

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Investment to fuel growth in domestic demand

Contribution to growth in Alberta real GDP by expenditure

Source: Statistics Canada, Haver Analytics, Alberta Treasury Board and Finance; e-estimate, f-forecast * Includes total household, business, and government spending

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 (percentage points) Total Domestic Demand* Exports Imports Real GDP (%)

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Delayed recovery in incomes

Real GDP, Real GDP Per Capita and Nominal GDP, Indexed to 2014 Peak

Source: Statistics Canada, Haver Analytics and Alberta Treasury Board and Finance; e-estimate, f-forecast

70 75 80 85 90 95 100 105 110 115 120 2014 2015 2016 2017 2018e 2019f 2020f 2021f 2022f 2023f (2014=100) Real GDP Real GDP per Capita Nominal GDP

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Provincial activity stagnates

The Alberta Activity Index

Source: Alberta Treasury Board and Finance

88 90 92 94 96 98 100 102 (May-18=100)

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Business output pulls back from 2019 high

Alberta’s merchandise exports and manufacturing shipments

Source: Statistics Canada

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 4 5 6 7 8 9 10 11 12 13 ($millions) ($millions) Merchandise Exports (left) Manufacturing Shipments (right)

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Oil and gas activity rebounding?

Number of rigs drilling for oil and gas in Alberta

Source: Canadian Association of Oilwell Drilling Contractors *The estimate for January 2020 based on average rigs drilling in the first three weeks

50 100 150 200 250 300 2015-2018 Range 2015-2018 Average 2017 2018 2019 2020*

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Oil and gas investment to pick up, production will continue to rise

Alberta energy investment and crude oil production

Source: Statistics Canada, Alberta Treasury Board and Finance, Budget 2019; e-estimate, f-forecast

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 10 20 30 40 50 60 70 (mmbpd) ($billions) Oil Sands Investment (left) Conventional Oil and Gas Investment (left) Production (right)

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Differential to remain wide until full market access achieved

Oil Prices

Source: Alberta Energy, Alberta Treasury Board and Finance; f-forecast

20 40 60 80 100 120 (US$/bbl) WTI-WCS Differential WTI WCS

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Pipeline capacity critical for expanding production

Takeaway capacity* and Western Canadian crude oil production

Source: Alberta Energy, * Includes crude-by-rail

2,000 3,000 4,000 5,000 6,000 7,000 (kbpd) Rail Takeaway Capacity Western Canada Demand and Pipeline Takeaway Capacity Total Western Canada Crude Oil Production Keystone XL TMX Line 3 commences (one year delay

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Non-residential construction investment remains weak

Year-over-year growth in nominal non-residential building construction by structure type

Source: Statistics Canada

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 (percentage points) Industrial Buildings Commercial Buildings Institutional & Governmental Buildings Non-Residential Construction (%)

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Engineering construction investment on the rise

Business investment by asset (NSA)

Source: Statistics Canada

5 10 15 20 25 30 ($billions) Non-Res Building Engineering Construction Machinery & Equipment Intellectual Property

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Growth in contractor prices slowing

Year-over-year growth in non-residential building construction price index and selected input prices

Source: Statistics Canada * Alberta is the average of Calgary and Edmonton CMA

  • 50
  • 40
  • 30
  • 20
  • 10

10 20 30 40

  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 (%) (%) Alberta Non-Residential Construction Price Index* (left) Canadian Softwood Lumber Prices (right) Canadian Steel Product Prices (right)

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Non-energy sector a key driver of investment

Change in private non-residential investment in Alberta

Source: Statistics Canada, Haver Analytics, Alberta Treasury Board and Finance; e-estimate, f-forecast

  • 5
  • 4
  • 3
  • 2
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1 2 3 4 5 6 2017 2018 2019e 2020f 2021f 2022f 2023f ($billion) Other Mining Other Industries Oil & Gas Extraction Total

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Employment gains concentrated in private and service sector positions

2019 change in employment

Sources: Statistics Canada

0.5 2.0 3.0

  • 10.2

1.6 0.2

  • 1.8

1.3

  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 (%)

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Employment recovery remains uneven across regions

Seasonal adjusted employment indexed to peak month, by region

Source: Statistics Canada, Haver Analytics, TBF *Other includes Red Deer, Camrose-Drumheller, and Banff-Jasper-Rocky Mountain House, Athabasca-Grande Prairie-Peace River ** No LFS data reported for Wood Buffalo-Cold Lake from June-September 2017

88 92 96 100 104 (Peak=100) Other* Calgary Wood Buffalo-Cold Lake** Edmonton

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Unemployment rate to ease gradually

Labour Market Indicators

Sources: Statistics Canada, Haver Analytics and Alberta Treasury Board and Finance; e-estimate, f-forecast *The number of people working or looking for work.

  • 2

2 4 6 8 10 (%) Unemployment Rate Labour Force* Growth Employment Growth

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Earnings picking up

Alberta average weekly earnings

Sources: Statistics Canada

  • 6
  • 4
  • 2

2 4 6 8 (y/y % change) Total Goods sector Service sector

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Natural increase and immigration drive population growth

Annual Change in the Alberta Population by Component

Sources: Statistics Canada, Haver Analytics and Alberta Treasury Board and Finance; e-estimate, f-forecast

  • 1.0

0.0 1.0 2.0 3.0

  • 40

40 80 120 (%) (thousands) Natural Increase (Left) Net International (Left) Net Interprovincial (Left) Population Growth (Right)

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Albertans keeping a lid on spending

Retail sales in Alberta

Sources: Statistics Canada

5.7 6.0 6.3 6.6 6.9 7.2

  • 10

10 20 30 ($ billion) (%) Year-over-year growth (Left) Retail sales (Right)

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Services propping up consumer spending

Contribution to Change in Alberta Real Household Consumption

Source: Statistics Canada, Haver Analytics and Alberta Treasury Board and Finance; e-estimate, f-forecast

  • 2
  • 1

1 2 3 4 5 2014 2015 2016 2017 2018e 2019f 2020f 2021f 2022f 2023f (percentage points) Services Durable Goods Semi and Non-Durable Goods Household Consumption

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Housing activity rebounds from poor start to 2019

Annualized Alberta housing start & existing home sales (three-month moving average)

Source: Canadian Real Estate Association, Canada Mortgage and Housing Corporation

10 20 30 40 50 60 70 80 (Thousands) Housing starts Existing home sales

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Housing starts to rise gradually

Alberta Housing Starts by Type

Source: Canada Mortgage and Housing Corporation, Haver Analytics and Alberta Treasury Board and Finance; f-forecast

5 10 15 20 25 30 35 40 45 (Units) Single and Semis Row and Apartments Forecast

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Risks elevated for Alberta economy

Alberta Real GDP Growth

Source: Statistics Canada and Alberta Treasury Board and Finance; f-forecast

  • 2
  • 1

1 2 3 4 5 2018 2019f 2020f 2021f 2022f 2023f (%) Global Recession No Market Access Baseline High