Momentum slowing in recent Business Sentiments Index(TM)



    EDMONTON, April 3 /CNW/ - The most recent ATB Financial Business
Sentiments Index(TM) indicates a slowdown in the momentum of growth for
businesses in Alberta.
    "We are seeing a tempering in business optimism across most sectors,
particularly in oil and gas," says Dr. Bob Ascah, Vice President at ATB
Financial. "With the exception of manufacturing, year over year results show a
decline in the Index, although there are seasonal factors contributing to that
deceleration."
    For the second quarter of 2007, the Business Sentiments Index(TM) is
140.3, virtually the same level as the 2007 first quarter Index of 140.2.
Anticipated growth has declined somewhat compared to 2006 results. This
stabilization shows a general slowing in momentum.
    According to the Index of Hiring Intentions, which provides information
on jobs created, Alberta businesses continue to face challenges in finding
employees. At 131, the index shows there is little change from the first
quarter of this year but a decline from 2006 levels. "While there is
moderation compared to 2006, labour shortage is still a pressing matter for
businesses," says Ascah. "The sectors facing the most challenges are
construction, manufacturing, and wholesaling."
    This quarter, for the first time, businesses were asked to describe their
phase of development. Just under 87% of the sample assess their position as
one of "considerable growth" or of "stability and holding market position."
Other descriptions include: a beginning or start-up phase, ready to transfer
to a new owner or successor and winding down or reducing the size of
operations.
    Has the Alberta economy been overheated? "You bet it has," says Dr. Ted
Chambers, Research Professor, Western Centre for Economic Research, University
of Alberta. "One very good indicator of the pressures on the capacity of the
economy is the rate of increase in full time jobs. Over the past 24 months
these accelerated to a rate 2 1/2 times the long-term average with all of the
difficulties that creates for productivity, infrastructures, housing and a
range of public services. Our results suggest that growth is now reverting to
healthier and more sustainable levels."
    "Now that we can compare data on a year-over-year basis, we can begin to
identify patterns that may relate to seasonal phenomena and other factors,"
continues Dr. Ted Chambers. "Our results continue to be consistent with other
research."
    The survey assesses activity in the economy by responses about sales
experience during the prior quarter. The Activity Index, at 128 for the first
quarter of 2007, indicates a significant deceleration from the average 2006
level of 143. Since the inception of the survey, the comparison of actual
activity against the sentiment for the period shows a tendency for the
Business Sentiments Index(TM) to exceed the Activity Index. "This can be
attributed to the generally optimistic outlook of Alberta business people and
to the difficulty of achieving targets in and environment of labour and skills
shortages," says Dr. Chambers.

    About the ATB Financial Business Sentiments Index(TM)
    The ATB Financial Business Sentiments Index(TM) is compiled by the
Western Centre for Economic Research at the University of Alberta's School of
Business. It was commissioned in late 2005 as a tool to evaluate the
intentions of Alberta business. The Index is developed from the findings of a
WCER/ATB poll conducted from February 5 to February 16, 2007. For the survey,
a representative sample of over 400 Alberta businesses in key industries is
interviewed by telephone. With a sample of this size, the results are
considered accurate to within +/- 5 percentage points, 19 times out of 20. The
margin of error will be larger within regions and for other sub-groupings of
the survey population.

    About ATB Financial
    ATB Financial is a leading full-service financial institution based in
Edmonton, Alberta, Canada. ATB serves over 600,000 Albertans in 245
communities through 153 branches and 135 agencies, as well as a customer
contact centre in Calgary, Alberta. Services are also available through
automated banking machines and online banking. A wide range of wealth
management products and services are provided under the banner of ATB Investor
Services. For further information on ATB Financial please visit our website at
www.atb.com.

    About the Alberta School of Business, Western Centre for Economic
    Research
    The Western Centre for Economic Research (WCER) monitors the performance
of Western Canada's economy, its policies and programs, and implications for
business enterprises. Drawing on a wide range of expertise, the recent work of
the WCER has included analyses of the Alberta resource economy, Western
Canadian international trade, the effects of free trade agreements, barriers
to trade and the role of small business in the West. For further information
please visit our website at www.bus.ualberta.ca/wcer.

    For the full results, please see the attached backgrounder or visit the
Western Centre for Economic Research web site at
http://www.bus.ualberta.ca/wcer/


    
                                 Backgrounder
                 ATB Financial Business Sentiments Index(TM)

    Where Is The Alberta Economy Going?
    Research and Analysis by the Western Centre for Economic Research, School
of Business, University of Alberta.

    Research Methodology and Interpretation
    These indexes are based on responses to a telephone survey of over 400
business firms in key driving sectors of the Alberta economy:
    -   oil and gas exploration and development
    -   construction
    -   manufacturing
    -   transportation and warehousing
    -   wholesaling
    -   professional and technical services

    Respondents were asked to describe their business situation as one of the
following:
    -   in a beginning or start-up phase (2.9%)
    -   experiencing considerable growth (34.2%)
    -   stable and maintaining market position (52.4%)
    -   ready to transfer to a new owner or successor (6.9%)
    -   winding down or reducing the size of operations (3.1%)
    

    Just under 87% of the sample assess their position as one of considerable
growth or of stability and holding market position. The distribution of these
responses by industry sector is shown in Figure 1.
    The survey questions adapt to the circumstances of each sector. They are
basic and simple to understand. The survey instrument is included in
Information Bulletin No. 88, ATB Financial Alberta Business Sentiments
Index(TM) and can be found online at www.bus.ualberta.ca/wcer.

    
    The Business Sentiments Index(TM) and the Hiring Intentions Index are
constructed as follows:
    -   take the difference between the percentage of positive and negative
        responses to questions about current and future sales and employment
        requirements i.e. % stating 'increase' minus % stating 'decrease'
    -   convert the results to an index measure, i.e. add 100 to the %
        difference
    -   assign weights to the index of responses from each sector to obtain a
        composite index.

    To interpret the results:
    -   growth in the economy if the index is greater than 100
    -   an economy in neutral if the index is at 100
    -   decline in the economy if the index is below 100.

    The higher the value of the index the stronger is the sentiment for
expansion. The ceiling value of the index is 200 (all respondents expect
increase) and the floor value is zero (all respondents expect a decrease).
    

    Results
    For Q2 2007, the Index is 140.3, the same level as in Q1 2007. Figure 2
and Figure 3 show a 2006 four quarter average of 154.7 and a level of 152.1 in
Q2 2006.

    To view all Figures please copy and paste the following link into your
    web browser: http://files.newswire.ca/467/ATB_Index.pdf

    The new BSI of 140.3 compares with the 152.1 in the comparable quarter
last year. However, the BSI for the south in Q2 2006, like that for Q2 2007,
was stronger than that in the north. This could well be a seasonal phenomenon.
    Activity in the economy is assessed by responses to our questions about
sales during the prior quarter. Estimated activity levels for Q1 2007 as well
as the quarterly average for 2006 and Q4 2005 are compared in Figure 4. There
is an indication of a significant deceleration from 2006 average levels.
    Figure 5 compares the Activity Indexes for Q1 2007 with the comparable Q1
2006. The deceleration is clear.
    Figure 6 compares the BSI and the Activity Indexes since the inception of
the survey. The results indicate that, with the exception of Q3 2006, there
has been a tendency for the BSI to exceed the Activity Index. This can be
attributed first to the generally optimistic outlook of Alberta business
people and second to the difficulty of achieving targets in an environment of
labour and skills shortages.
    Figure 7 contains a comparison of industry sector sentiment for Q2 2007
with that for Q1 2007 and the average for 2006. Sector BSIs show strengthening
over Q1 2007 in Manufacturing, Transportation/Warehousing, and Wholesaling.
The Construction BSI remains unchanged. The Professional and Technical
Services BSI indicates slowing of growth while the Oil and Gas BSI indicates a
no-growth outlook.
    Further understanding of sector BSIs is found in Figure 8, which compares
Q2 2007 with Q2 2006. Here, in every instance except Manufacturing, the
current BSI is below last year's. The results, when combined with Figure 7,
also suggest that the increase in Q2 2007 Wholesaling and Transportation BSI
is largely seasonal.
    The quarterly survey also provides information on jobs created by Alberta
firms in the form of the ATB Financial Index of Hiring Intentions. The current
index shows that there is generally little change from Q1 of this year, but a
decline from the average levels of 2006. Figure 9 compares the Index of Hiring
Intentions for Q1 and Q2 2007 with the average quarterly level in 2006.
    Hiring intentions are explained more fully by comparing Q2 2007 with Q2
2006 as shown in Figure 10. Some deceleration is evident in what still remains
a buoyant job market.
    Figure 11 compares hiring intentions by industry sector for the first two
quarters of this year and the average for 2006. The results indicate hiring
intentions, compared with Q1 2007, will accelerate in Construction,
Manufacturing, and Wholesaling; they will decelerate in Oil and Gas,
Professional and Technical Services, and Transportation, which contribute to
the aggregate deceleration.

    To view all Figures please copy and paste the following link into your
    web browser: http://files.newswire.ca/467/ATB_Index.pdf

    Oil and Gas
    Of the 67 respondents, 39% experienced increased activity over the past
three months, while 36% indicated that their activity had decreased. In the
coming quarter, respondents are almost equally divided between those expecting
an increase, those expecting no change, and those expecting a decrease. With
respect to hiring intentions, some 63% of respondents indicated there would be
no change in employment in the coming quarter, 23% indicated they would add
employees, while 14% indicated there would be a decrease in employment.

    Construction
    Of the 68 respondents in Construction, 43% indicated that their activity
had increased in the past three months, while 45% indicated that their
activity levels were unchanged. Some 38% indicated that their current contract
work was more than sufficient while 11% indicated that it was insufficient.
Some 46% indicated that they planned to increase employment in the coming
quarter, 48% planned no change in employment and only 6% planned to have fewer
workers in the coming quarter. Figure 12 shows that, assuming normal working
hours, one-half of the respondents have at least six months work in hand or
already under contract. Further, 29% of respondents had a backlog of one
year's work.
    The survey asks about factors limiting business activity: shortage of
labour, weather conditions, insufficient demand, shortage of construction
material or equipment, financial constraints, land availability and other
factors. Figure 13 reveals that the shortage of labour was identified as an
inhibiting factor by 57% of respondents. Weather conditions (22%),
insufficient demand (14%) and land availability (13%) were next in importance.

    To view all Figures please copy and paste the following link into your
    web browser: http://files.newswire.ca/467/ATB_Index.pdf

    Manufacturing
    Some 49% of the 70 manufacturing respondents indicated that their
production had increased over the past quarter. Some 65% anticipate further
increases in production over the coming quarter with just over 47% planning to
increase employment. With regard to orders, Figure 14 shows that 30% of
respondents indicated that there were more than sufficient orders while only
13% regard current orders as insufficient. Those that consider their stocks of
finished products as adequate for their needs represent 73% of respondents.
    Figure 15 reveals that almost three-quarters of respondents expect their
selling prices to remain unchanged in the coming quarter.

    To view all Figures please copy and paste the following link into your
    web browser: http://files.newswire.ca/467/ATB_Index.pdf

    Professional and Technical Services
    There were 72 respondents in this group, of which 49% experienced
increased demand for their services during Q1 2007. In the coming quarter, 56%
expect demand to increase and 35% plan to increase employment. No change was
expected by 36% and 63% of respondents respectively.

    Transportation/Warehousing
    Of the 71 respondents in this group, almost one-half recorded increased
business while 14% experienced decreases in Q1 2007. In Q1 2007, 27% increased
employment. Two-thirds expect their business to increase again in Q2 2007,
while 11% expect a decrease in business. In this group, 40% are planning to
add employees while 51% plan for no change in employment numbers.

    Wholesalers
    Of the 70 respondents in the Wholesalers group, almost one-half recorded
increased sales in Q1 2007. Seventy per cent expect sales to increase again in
Q2 2007, with 35% planning to increase employment. Figure 16 indicates that
inventory appears adequate for two-thirds of the respondents, while 15% regard
inventory levels as insufficient. In Q2 2007, 61% plan to place increased
orders with suppliers, while 35% will leave the level of their orders
unchanged.

    To view all Figures please copy and paste the following link into your
    web browser: http://files.newswire.ca/467/ATB_Index.pdf




For further information:

For further information: Brian Countryman, Director, Corporate
Communications, ATB Financial, (780) 408-7307, E-mail: bcountryman1@atb.com;
Jean Frost, Research Assistant, Western Centre for Economic Research, School
of Business, University of Alberta, (780) 492-2235, wcer@ualberta.ca


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