OTTAWA, Nov. 14, 2016 /CNW/ - Calgary and Edmonton are suffering through another year of recession in 2016, but a modest recovery is in sight for both cities next year, according to The Conference Board of Canada's Metropolitan Outlook: Autumn 2016.
"Low oil prices continue to cause widespread economic pain across most cities in Alberta, including Calgary and Edmonton," said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. "However, we expect that 2016 will mark the end of this latest recession, as both metropolitan economies are expected to start recovering next year, in line with gradually rising crude oil prices."
- Calgary's economy is expected to contract by 2.1 per cent in 2016, before rebounding by 2 per cent in 2017.
- Edmonton's economy is on track to post 1.4 per cent decline this year, followed by growth of 2 per cent next year.
- Vancouver will have the fastest-growing metropolitan economy over this year and next, with growth of 4 per cent and 2.8 per cent respectively.
Calgary economy's is on track to contract by 2.1 per cent in 2016, after falling by 3.2 per cent in 2015. Not surprisingly, the resources sector, which includes oil and gas extraction, has seen significant declines in output over the past two years. But sectors with indirect ties to the energy industry, like non-residential construction, manufacturing, transportation and warehousing, business services, and wholesale and retail trade, are also shrinking. At the same time, the weak economy and falling employment are weighing on consumer confidence, leading to declines in housing market activity and in personal services, which includes accommodation and food and also arts, entertainment, and recreation. In fact, the construction sector has experienced the steepest declines in output, as large reductions in energy-related investment, office investment, and residential investment have taken their toll. Construction output in Calgary fell close to 18 per cent last year and is expected to decline by roughly 13 per cent in 2016. Next year, a modest recovery of 1.2 per is forecast.
Although crude oil prices are expected to gradually rise, they will remain well below pre-2014 levels over the entire forecast. Still, prices will rise enough to lay the foundation for a modest upswing in primary and utilities output next year. In total, Calgary's real GDP is forecast to grow by 2 per cent in 2017. As such, employment is expected to bounce back with a 1 per cent gain next year, following a dip of 1.7 per cent this year.
Similar to Calgary, Edmonton's economy is on track to post a 1.4 per cent decline this year. Edmonton's construction sector has been the hardest hit by the drop in oil prices, with output dropping nearly 15 per cent in 2016, with a further 8.5 per cent drop projected for this year. Massive cuts in energy investment are largely responsible for the declines in output, although residential investment has also been quite weak. Meanwhile, big reductions in oil production will cut activity in the resources industry, which also includes utilities, by 1.6 per cent this year, following a 3.9 per cent decline in 2015. Other industries with indirect ties to the oil and gas sector are also struggling, including manufacturing and wholesale and retail trade. On a positive economic note, Edmonton's large public sector has been growing strongly, helping to offset the downturn in the oil and gas sector. Indeed, non-commercial services and public administration are set to be the growth leaders this year. Although output growth is expected to moderate in the public sector next year, it will still remain a key contributor to the bottom line.
Edmonton's economy is also expected to start recovering next year, in line with a gradual rise in oil prices. Primary and utilities output is forecast to expand by 4 per cent in 2017, helping the overall economy to post growth of 2 per cent in 2017. Still, the labour market will be slow to recover—employment is expected to dip by 0.2 per cent next year on the heels of a tiny 0.6 per cent gain this year. As such, the region's unemployment rate will remain uncharacteristically high at 7.1 per cent in 2017.
Among the 13 census metropolitan areas covered in the Autumn edition of the Metropolitan Outlook, Vancouver, Toronto and Halifax will be the three fastest-growing metropolitan economies this year and next.
Join Alan Arcand on November 22, 2016 for a webinar, Beyond Slogans: Comparing Canadian Cities to the World's Best, which describes how five Canadian cities—Toronto, Montréal, Vancouver, Calgary, Halifax—compare economically and socially against some of the leading metropolitan areas in the world.
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