Alberta's red hot economy expected to slow, says RBC Economics



    TORONTO, June 22 /CNW/ - While Alberta's economy outperformed the country
last year, with growth more than double the national rate, its economy is
expected to cool to 4.6 and 4 per cent in 2007 and 2008 respectively,
according to a provincial economic outlook released today by RBC.
    "Strong fundamentals have been driving Alberta's economy for the past
year with annual wage growth tracking at five per cent, unemployment hovering
near three per cent and strong net provincial migration," says Craig Wright,
vice-president and chief economist, RBC. "However, looking ahead there are
several factors that will contribute to a relative cooling of this red hot
economy."
    Record levels of inter-provincial migration have allowed for a rapidly
expanding workforce to meet growing demand, according to RBC. As a result,
this influx has caught housing supply off guard, triggering a significant
erosion of housing affordability. The sudden drop in affordability will dampen
demand and limit price growth for the housing market in the upcoming year.
    Capacity pressures and labour shortages have also meant much higher costs
for both businesses and consumers. Inflation is running above five per cent,
new house prices continue to grow between 20 and 30 per cent annually, and
non-residential building construction prices rose 20 per cent year-over-year
in both Calgary and Edmonton. Major cost escalations and over-runs, combined
with a rising interest rate environment, will deter some projects from going
forward and hopefully stabilize future demand.
    "In addition, oil and gas drilling has already started to top out and
overall drilling activity is expected to drop by about 20 per cent in 2007,"
noted Wright.
    Across Canada, Newfoundland and Labrador will be the provincial growth
leader in 2007 at 7.5 per cent before experiencing a dramatic pull back next
year, shifting the spotlight back onto the more sustainable growth in Western
Canada. Prince Edward Island and Ontario will be at the back of the pack, each
with growth rates just shy of two per cent this 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
                  06     07     08     06     07     08     06     07     08
                  --     --     --     --     --     --     --     --     --
    NFLD.        2.8    7.5    0.5    2.2    2.0    1.8    2.9    5.5    2.0
    P.E.I.       2.0    1.9    1.7    0.7    0.6    0.6    4.1    4.5    3.7
    N.S.         1.1    2.4    2.3    4.9    4.5    4.4    6.3    3.1    3.3
    N.B.         2.6    2.5    2.6    4.1    3.8    3.7    5.5    3.9    4.0
    QUE.         1.7    2.1    2.6   47.9   42.1   39.6    4.5    4.7    4.8
    ONT.         1.9    1.9    2.7   73.4   63.9   60.0    4.0    3.5    4.9
    MAN.         3.3    3.0    3.2    5.0    5.3    4.4    5.8    6.1    6.0
    SASK.        0.4    4.0    3.6    3.7    4.6    3.9    5.9    7.4    6.0
    ALTA.        6.8    4.6    4.0   49.0   44.8   39.9   16.0    9.3    8.5
    B.C.         3.6    3.2    3.3   36.4   35.3   31.1    6.2    6.0    5.8
    CANADA       2.8    2.6    2.9    228    208    190    6.2    5.2    5.2


                     Employment              CPI

                  06     07     08     06     07     08
                  --     --     --     --     --     --
    NFLD.        0.7    1.2    0.1    1.8    2.0    1.4
    P.E.I.       0.6    0.8    0.4    2.3    1.5    1.7
    N.S.        -0.3    1.1    0.3    2.0    1.4    1.3
    N.B.         1.4    0.8    0.4    1.7    1.5    1.4
    QUE.         1.3    2.0    0.9    1.7    2.3    1.8
    ONT.         1.5    1.3    1.0    1.8    2.1    2.1
    MAN.         1.2    1.1    0.9    2.0    2.3    2.5
    SASK.        1.7    3.0    1.0    2.1    3.5    2.8
    ALTA.        4.8    4.2    2.0    3.9    5.2    3.5
    B.C.         3.1    3.0    1.9    1.7    2.2    2.3
    CANADA       2.0    2.0    1.2    2.0    2.4    2.2
    





For further information:

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


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