the capital region’s economic outlook october 15, 2012alberta continues to outperform national...
TRANSCRIPT
John RoseChief Economist
Financial Services and Utilities
The Capital Region’s Economic Outlook
October 15, 2012
The Capital Region’s Economic Outlook
October 15, 2012
AgendaRecent Developments
• The Global Context• Canada , Alberta, Edmonton• Energy prices• Alberta and the Capital Region, job growth,
inflation, building permits and housing starts
The Outlook• The Region, Edmonton and Strathcona• High growth sectors• Risks and opportunities
Global Environment
• An uneven and anaemic recovery is underway
• Euro zone to experience a ‘double dip’
• Global financial markets remain fragile
% Real Growth
-1 2 5 8
China
Emerging
World
Canada
US
Euro Area
2012 2013
Source: International Monetary Fund
Canada, Alberta & the Capital Region
• Canadian domestic conditions remain good - western provinces out perform
• Sluggish US expansion will moderate growth
• Alberta continues to outperform national average
• 2012 bright for GDP & employment growth in Region
• Edmonton’s growth will slow to more sustainable levels in 2013
% Real Growth
0 1 2 3 4 5
City of Edmonton
The Region
Strathcona County
Alberta
Canada
2012 2013
Source: IMF, Conference Board, City of Edmonton
Oil Prices West Texas Intermediate
Source: US Energy Information Administration
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
$US
Bbl
5 Year Max5 Year Min20112012
Oil Price Gaps Grow
Source: Bloomberg
Natural Gas Prices Henry Hub
Source: US Energy Information Administration
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec
$US/
mm
Btu
5 Year Max
5 Year Min
20112012
Alberta’s Unemployment Down• Alberta’s labour
market is paused in first quarter.
• Unemployment should fall to an annual average of just below 4.4% in 2012.
• Unemployment rates significantly below 5% can trigger wage increases and higher inflation.
Alberta's Unemployment Rate
0
1
2
3
4
5
6
7
2006
2008
2010 Feb Apr
June Aug OctDec Feb AprJu
ne Aug
%
Source: Statistics Canada
Annual Monthly
Alberta’s Inflation Moderates• Inflation is now running
at 0.9%, well below 2011.
• Key drivers of lower inflation have been electricity and gasoline prices.
• Inflation should accelerate over 2012. The current forecast is 2.5% for 2012.
Alberta Consumer Price Index
(Annual Rate of Change)
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2006
2007
2008
2009
2010
2011 July
Source: Statistics Canada
Job Growth Returns• The Region’s rate of
job growth in 2011 among the fastest of any large municipality.
• Growth stalled in late 2011 and early 2012.
• Growing labour force has moderated wage pressures.
• Recent strong job gains point to labour shortages and wage pressures.
Source: Statistics Canada
Region’s Unemployment Rate
0
1
2
3
4
5
6
7
8
AugNovFebMayAugNovFebMayAug
%
The Capital Region Labour Market• Outstanding growth in
employment and population.
• High incomes and low inflation.
• Very strong migration into the region.
• Implications – Strong momentum in the local economy will sustain growth into 2013. Expect growth to cycle toward the consumer side.
% Annual Growth to August
0 1 2 3 4
Canada
Alberta
CapitalRegion
Work Age Pop Labour Force Employment
Source: Statistics Canada
Consumer Inflation Stabilizes• The region’s year-over-
year inflation rate is down to 1.0% from relatively high levels in 2011.
• As with Alberta, inflation will pick up somewhat from current levels. Forecast is for 2.5% by the end of 2012.
Source: Statistics Canada
Capital Region CPIAnnual Rate of Change
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2006 2007 2008 2009 2010 2011 July
Non Residential Construction Price Index
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Q12002
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Q12009
Q12010
Q12011
Q12012
Source: Statistics Canada
Real Growth in GDP• The Region has enjoyed a quicker recovery as manufacturing and non-residential construction activity picks up.
• Over the medium term the city growth rate converges with that of the region.
• Younger demographic profile allows the region to grow more rapidly than Canada in the final years of the outlook.
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
% R
eal G
row
th
Edmonton CMA City of Edmonton Strathcona County
Source: City of Edmonton
Estimated Real GDP for 2012 Millions of $2002
City of Edmonton
68%
Strathcona County
9%
Rest of CMA23%
Total Real GDP for the Edmonton CMA $56,719 million
High Growth Sectors for Small Business
• Manufacturing – Metal Fabrication, Machinery, Food Products
• Transportation and Logistics• Construction – Residential,
Renovation and Maintenance• Retail• Personal Services• Entertainment, Hospitality, Culture
Downside and Upside RisksDownside
• Growing discount for Cdn oil
• European financial crisis worsens
• Cdn housing market stumbles
• Sudden slowdown in emerging markets
Upside• U.S. recovery gains
momentum • Europe patches over
financial issues and returns to faster growth profile
• China and other emerging countries succeed in stimulating more rapid growth
Q & AJohn RoseChief EconomistFinancial Services and Utilities5th Floor, Chancery HallEdmonton, Alberta, T5J 2C3(780) [email protected]