OIL RICHES

Alberta’s oil riches driving Canada’s economy: BMO
By: Lauren Krugel
Canadian Press Oct 9, 2012

CALGARY — Canada’s economic growth is being driven by resource-rich Western provinces, according to a Bank of Montreal report released Tuesday.

Alberta leads the pack, with the bank predicting 3.5% real GDP growth this year, falling back a bit to 2.9% in 2013.

“The energy sector remains the key driver of economic activity in the province, with crude bitumen production up 16% year-over-year through the first half of the year, and the Energy Resources Conservation Board expecting oil sands output to more than double by 2021,” said economist Robert Kavcic.

The energy sector’s strength has attracted workers from elsewhere in Canada to Alberta, which has the country’s lowest unemployment rate at 4.4%.

But BMO Kavcic says the industry faces some risk.

“Cost pressures could again pick up, though oil sands operations are generally viewed as economical at prices above US$80 (per barrel),” he said.

“Also, wrangling over new pipeline capacity continues.”

Production from the Bakken, a massive oil deposit that stretches through parts of Montana, North Dakota and Saskatchewan, is filling up existing pipelines and causing Canadian producers to get a lower price for the heavy crude they produce.


“Estimates suggest that production in Western Canada could be negatively impacted by 2015/16 if there is not enough new pipeline capacity put in place.”

BMO says Canada’s overall real GDP growth is expected to be 2.2% in 2012, with the Western provinces all topping that rate.

Saskatchewan, where oil and gas extraction and potash and uranium mining are big economic drivers, is expected to see growth of 3.1% this year.

For British Columbia, it sees real GDP growth of 2.5% and for Manitoba, growth of 2.6%.

Further east it’s a different story. BMO sees Ontario posting growth of two per cent and the economies of Quebec and the Atlantic provinces growing at less than two per cent in 2012.

The report says fiscal restraint, the high loonie and sluggish U.S. demand are putting a damper on growth in Central Canada.

Kavcic noted some cause for optimism in Ontario’s auto sector.

“Auto producers continue to invest in North America and, despite a strong currency and higher labour costs compared to the southern U.S. and Mexico, Ontario is no exception,” he said.

“Toyota, for example, is expanding production at its Woodstock assembly plant — a project worth about $100-million and 400 jobs. Plus, the CAW and Big Three automakers recently reached new four-year contract agreements. Output in the auto sector was up a solid 20 per cent year-over-year through August.”

Also Tuesday, the International Monetary Fund trimmed its global growth forecasts in its quarterly economic outlook.

The IMF predicts the global economy will expand 3.3% this year, down from the estimate of 3.5% growth it issued in July. Its forecast for growth in 2013 is 3.6%, down from 3.9% three months ago and 4.1% in April.

Photo By: inertiachick

FUEL EXPANSION

Calgary and Edmonton to lead Canadian economic growth
Energy-related investment to fuel expansion
By Mario Toneguzzi
Calgary Herald September 18, 2012

CALGARY — Calgary and Edmonton are forecast to be the fastest growing economies in Canada over the next four years, according to the Conference Board of Canada’s Metropolitan Outlook-Autumn 2012 released Tuesday.

“Energy-related investment in Alberta is expected to stay vibrant throughout the next four years. For instance, about $29-billion worth of energy-related projects are now underway in the province, and nearly $86-billion worth of projects are proposed for the future,” said Mario Lefebvre, Director, Centre for Municipal Studies, for the board.

“All this investment will continue to be a boon to Calgary’s economy, which remains the services hub of the province’s energy sector.”

The board is forecasting Calgary to have the best economic growth in the country over 2013-2016 at an average of 3.7 per cent followed by Edmonton’s average annual real GDP growth at 3.5 per cent during the forecast period.

For this year, the board is predicting Edmonton will lead the country with 4.6 per cent growth followed by Calgary at 3.8 per cent.

“Without a doubt, I expect that Alberta is going to be the envy of the country moving forward into closing out 2012 and into 2013,” said Ben Brunnen, chief economist with the Calgary Chamber of Commerce. “While the growth will be the strongest in the country, particularly for our cities, that doesn’t necessarily mean that we’re in great economic times.

“There are some storm clouds on the horizon. I expect fully we’ll see a recession in Europe. The Chinese economy is slowing substantially. And the U.S. has its election coming forward. What this means is there’s going to be a dampening on economic growth globally and as a consequence it’s going to affect Canada. That said, the investment in the province has been strong to date and should continue to be strong.”

The board said Calgary is coming off a “very strong performance” in 2011 with economic growth at 5.0 per cent. The strong growth expected during the forecast period will be “helped along by strong consumer spending and spinoff benefits from the energy sector.”

Employment growth is forecast for 4.1 per cent this year in Calgary followed by annual growth rates of 1.9 per cent, 2.6 per cent, 2.5 per cent, and 2.1 per cent from 2013 to 2016. And retail sales are forecast to grow by 9.2 per cent this year followed by growth of 6.2 per cent, 5.3 per cent, 5.3 per cent and 4.8 per cent during the forecast period.

Also on Tuesday, a report by TD Economics said Canada will likely experience a shift from household and government-led growth towards exports and investment, but global headwinds appear to have delayed this transition until the first half of 2013.

In the meantime, the report said, the economy will be stuck in neutral and Canada’s economic expansion will be constrained to a pace near two per cent.

“In the first half of 2012, governments constrained their spending while households pared back their rate of borrowing and spent at a miserly pace. While most major housing markets have held up reasonably well, there are signs — most notably in Vancouver — that markets have reached a peak,” said TD Bank Group’s chief economist Craig Alexander. “And in the near term, the slowdown is expected to broaden across the country, following the implementation of tighter rules on insured-mortgage lending this past summer.

“Canada’s economy has turned out a relatively strong performance in recent years, but the growth has not been broadly based and imbalances have amassed. On the plus side, governments and households, which have been pulling Canada’s economy along by the coat-tails for years, have begun to address their debt challenges. Recent changes to mortgage borrowing rules will help to address part of the over-valuation in housing markets. Going forward, it will be equally critical for the economy to transition to more export and investment-led growth.”

Photo By : Bulliver

LESS WILD, MORE URBAN

Alberta housing leads nation: CMHC
Latest forecast predicts more construction in Western Canada
By Lewis Kelly
Edmonton Journal August 15, 2012

The Canada Mortgage and Housing Corporation forecast Tuesday that housing construction and sales will increase modestly in 2013 in Alberta while activity in most of the country slows down.

The Crown corporation's latest housing market outlook predicts 400 more housing starts in 2013 in Alberta than 2012. That represents just 1.25-per-cent growth, but CMHC predicts national construction activity to decline 6.8 per cent over the same period.

"The economy in Alberta has been improving and is expected to be one of the leaders in economic growth," said Richard Cho, senior market analyst with CMHC's prairie division. "That will naturally support the housing market."

Cho said CMHC's forecast for Alberta hinges on continued job production, international and interprovincial immigration boosting population growth, and the price of oil staying high enough to encourage continued investment in the province's energy sector.

Oil has been trading around $90 a barrel since early August after reaching a yearly low of $79.69 in June. CMHC forecasts employment growth of 2.5 per cent in Edmonton and 2.9 per cent in Calgary in 2013, and net migration growth of 28 per cent to 57,800 in the coming year.

Tuesday's edition of the corporation's outlook, released four times a year, predicts just over 32,000 housing starts in the coming year for the province, 11,000 of those in Edmonton. The forecast calls for the resale market to also grow, reaching 59,800 by the end of this year and 61,000 in 2013.

Cho said the market has favoured buyers until recently and should move to a balanced state, boosting price growth in the process. The CMHC's forecast calls for prices to rise 2.5 per cent this year and 2.8 per cent in 2013 across Alberta, bringing the average home sale to $372,300.

The provincial picture differs from the national numbers. CMHC predicted 193,100 units of housing will get built across Canada in 2013 - down around seven per cent both from previous forecasts and 2012's forecast numbers.

Cho said the new federal mortgage rules introduced in July, which knock five years off the maximum amortization period, will soften demand for housing, but other factors ultimately carry more weight in real estate.

"The rules will certainly have an impact on housing demand, but it isn't the only factor" he said. "Housing demand is also supported by growth in employment and earnings as well as migration flows and relatively low mortgage rates."