TORONTO, June 3, 2015 /CNW/ - The oil price rout buffeting capital
spending in Alberta's energy sector prompted RBC to downwardly revise
its real GDP forecast for the province, according to the latest Provincial Outlook released today. RBC forecasts real GDP will contract by 1.0 per cent in
2015 on account of swift and considerable capital spending cuts. A
gradual recovery in energy prices is expected to contribute to a
turnaround in 2016 with a growth forecast of 1.7 per cent.
Still, RBC notes that earlier signs of Albertans' plummeting confidence
have largely abated with a stabilizing housing market and fairly
consistent employment levels.
"Alberta's energy sector continues to bear the brunt of the drop in oil
prices, but the broader effects have yet to be felt fully and the
resilience of Alberta's non-energy sectors will likely come under more
intense pressure in the coming months," said Craig Wright, senior
vice-president and chief economist, RBC. "Despite the negative outturn
in the provincial economy in 2015, we believe a gradual recovery in
energy prices will contribute to a turnaround in 2016."
RBC notes that low crude oil prices have put a painful squeeze on oil
and gas firms causing them to implement significant cost-cutting
measures. The prospect of policy changes at the provincial level was
added to the mix following the New Democratic Party's landslide
provincial election victory in early May. Proposed changes to corporate
income taxes and the review of the province's non-renewable resource
royalty regime are likely prompting firms to await clarity on the new
government's policy directions.
Moreover, RBC says recent oil sands closures in response to forest fires
could aggravate these challenging conditions. Amidst the instability,
however, crude bitumen production continued to surge during the first
few months of this year as producers churned out the strongest output
year-to-date in more than a decade, reflecting an increasing number of
new oil sands projects and expansions coming online.
Despite overall employment statistics showing a positive growth trend in
the province, there are indications that downward pressure is emerging
in the goods producing sectors - 14,000 jobs have been lost so far in
2015. Largely absorbing this slack, public sector hiring has kept
overall employment above year-ago levels.
"A steady rise in the labour force outpaced the hiring gains, resulting
in an unemployment rate that jumped to a near four-year high of 5.5 per
cent in March and April," added Wright. "There is concern that an even
sharper spike in unemployment could come in the months ahead as the
number of Albertans filing initial employment insurance claims surged
to a six-year high this spring."
Alberta's home sales picked have recently picked up from the depths they
reached during the winter months.
"New listings reversed much of the uncertainty-driven surge recorded
late last year, suggesting that confidence in the housing market is
returning. However, the market remains vulnerable to further turmoil
should the province's employment situation deteriorate," added Wright.
Given historically low activity year-to-date, RBC projects home resales
will fall significantly on an annual basis in 2015. Weakness will also
affect new home building as housing starts are forecasted to drop from
41,600 units in 2014 to 31,200 units in 2015.
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
For further information:
Craig Wright, RBC Economics Research, 416-974-7457
Laura Cooper, RBC Economics Research, 416-974-8593
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635