Alberta's economy is running into capacity constraints, says RBC



    TORONTO, July 3 /CNW/ - Resource and price constraints are limiting
Alberta's economic growth for 2008 and 2009, keeping it within the three per
cent range, or just slightly slower than in 2007, according to the latest
provincial forecast released today by RBC.
    "The province's economy has cooled considerably from its boiling point in
2006, with economic growth cut in half in 2007," said Craig Wright, senior
vice-president and chief economist, RBC. "While strength in the energy sector
and rising incomes are helping to drive the economy, we are seeing mounting
price pressures starting to slow consumer spending and restrain overall
growth."
    The report points to Alberta's housing market as a prime example of the
cooling of the economy. Significant house price increases over the past two
years have led to substantial erosion in affordability, and now the province
is experiencing declines in both resale and new home construction activity. A
higher cost of living is not only putting pressure on consumer spending but
also contributing to a dramatic swing in interprovincial migration, as the
province is witnessing its first net outflow in almost 15 years.
    Provincial government spending, which has grown by an average of 11 per
cent over the past five years, is projected to decline sharply over the next
two years. While the most recent budget projects a sharp slowing over the next
two fiscal years, recent experience suggests significant upside risks. Any
spending beyond budget plans would further press the economy against capacity
constraints and fuel inflation. "The Alberta government would be wise to stay
the line on spending and adopt policies to subdue inflation in order to
support the competitiveness of the economy," noted Wright.
    The main theme of the RBC Provincial Outlook continues to be the
different paths the Eastern and Western parts of the country are taking.
Record-high commodity prices and strong global demand for resources sustain
unprecedented prosperity in the Western provinces, while the strong Canadian
dollar, downturn in the U.S. economy and high energy prices continue to cause
hardship in key sectors in provinces east of Manitoba. Saskatchewan is
projected to lead all of the provinces in economic growth for both 2008 and
2009, followed by Alberta, while Newfoundland and Labrador and Ontario are
expected to lag the group this year, but should show some improvement next
year.

    The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, personal income
growth, retail sales, housing starts, and the Consumer Price Index.
    According to the report (available online as of 8 a.m. E.D.T., at
www.rbc.com/economics/market/pdf/provfcst.pdf), provincial forecast details
are as follows:

    
                    Real GDP           Housing starts         Retail sales

                                          Thousands
                  07    08    09        07    08    09        07    08    09
                  --    --    --        --    --    --        --    --    --
    NFLD.        9.1   0.2   1.3       2.6   2.6   2.0       8.9   6.0   2.0
    P.E.I.       2.0   1.2   1.6       0.8   0.7   0.6       7.7   4.5   3.7
    N.S.         1.6   2.0   2.4       4.8   4.7   4.0       4.2   5.5   4.5
    N.B.         1.6   2.0   2.5       4.2   4.2   3.4       5.7   4.6   4.0
    QUE.         2.4   1.0   2.3      48.6  47.1  40.0       4.6   4.3   4.4
    ONT.         2.1   0.7   2.2      68.1  68.7  59.3       3.9   4.4   4.5
    MAN.         3.3   2.7   2.7       5.7   5.9   4.5       8.8   8.5   7.0
    SASK.        2.8   3.7   3.8       6.0   6.6   4.5      13.0  12.0  11.0
    ALTA.        3.3   3.1   3.0      48.3  38.3  35.1       9.3   4.5   7.0
    B.C.         3.1   2.2   2.9      39.2  37.2  30.5       6.7   4.5   7.5
    CANADA       2.7   1.4   2.5       228   216   184       5.8   5.2   5.6


                   Employment                CPI


                  07    08    09        07    08    09
                  --    --    --        --    --    --
    NFLD.        0.6   2.0   0.5       1.5   2.5   1.4
    P.E.I.       1.0   1.3   0.3       1.8   3.2   1.5
    N.S.         1.3   1.0   1.9       1.9   3.0   1.6
    N.B.         2.1   1.6   1.0       1.9   1.8   1.5
    QUE.         2.3   1.4   1.3       1.6   2.2   1.4
    ONT.         1.6   1.5   1.3       1.8   2.0   1.5
    MAN.         1.6   2.1   1.7       2.0   2.0   1.5
    SASK.        2.1   2.4   2.3       2.8   3.4   2.6
    ALTA.        4.7   3.0   2.1       5.0   3.3   2.5
    B.C.         3.2   2.6   2.5       1.8   2.0   1.5
    CANADA       2.3   1.9   1.6       2.1   2.3   1.6
    





For further information:

For further information: Craig Wright, RBC Economics, (416) 974-7457;
Robert Hogue, RBC Economics, (416) 974-6192; Jackie Braden, RBC Media
Relations, (416) 974-2124


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