Each week our policy team will bring you an update on a key economic indicator along with a quick overview of how it may impact the business community.
Average October 2018 WCS-WTI Oil Price Differential
$49.62/per barrel – Average differential in October between Western Canada Select (WCS) and West Texas Intermediate (WTI) – as of October 11, 2018.
As of Oct 15, 2018, WTI was at $71.39 and WCS was $24.59.
The Alberta government has indicated that widening price differentials are costing Canadian producers and governments upward of $40-million a day.
While global oil prices have been recovering from the downturn, companies in Alberta have been unable to get world prices for their products and have been forced to accept a steep discount. This is why projects like the Trans Mountain Expansion are so important, Alberta needs more pipeline export capacity and access to world markets if we want to avoid selling our energy products at a significant discount.
There has always been a discount for WCS relative to WTI. But over the last decade the largest monthly average price differential was $38.94 in December of 2013 – and so far in October of 2018, the average differential has been $49.62, putting the gap between the two oil prices at the highest level on record.
Economic growth in 2017
4.9% – Alberta’s economy led growth among all provinces in 2017. But risks to future growth remain.
Canada’s economy grew by 3.3% last year, which was the highest growth among all G7 countries. The Alberta energy sector was a key contributor to growth with oil and gas extraction topping a record $125 billion in production.
Alberta’s economy also experienced a surge in growth. In 2017, the Alberta economy grew faster than any other province, 1 percentage point greater than BC – the second fastest growing province. To put this in context – it is greater than at the end of 2013, but below historic highs of 2014.
Canada and Alberta are both expected to see growth slow. Canada’s growth rate is expected to be around 2% in 2018 and 2019, with longer-term growth forecasted to slow to 1.75% – significantly lower than its historical average. The Alberta economy is also expected to see growth edge down around to 2.5% over the next few years.
Risks to future growth include uncertainty around market access and international trade, lagging business investment and the impact of U.S. tax reforms, along with government costs layered on business. Addressing these risks should be top priority for all levels of governments to support future growth.
0.7%; Canada’s economy grew by 0.7% from April to June, the strongest growth in a year
The Canadian economy grew by 0.7% during the second quarter of 2018 – the strongest growth rate in a year due to higher household spending and energy exports. Stretching this type of growth over the year would result in 2.9% yearly growth. In comparison, the U.S. economy is on pace to grow 4.2% in 2018.
Last year, Alberta’s economy grew by 4.9%, the fastest rate of growth among Canadian provinces. While Alberta’s economy is expected to keep rising, modest growth is expected, closer to 2% by 2020. Uncertainty continues to impact Alberta’s economic outlook, including global trade disputes, NAFTA, and delays to the Trans Mountain pipeline expansion project.
After two years of decline, Calgary economy grew by 3.1% last year. The economy is expected to continue growing, albeit at a slower 2.5% in 2018 and 2% in 2019. While Calgary’s recession appears to be over, many businesses may still be struggling as costs outpace revenue growth, and many workers are still looking for work as Calgary boasts the highest unemployment rate among Canada’s major cities.
Public sector growing in Alberta
Since 2014, public-sector jobs across all three levels of government in Alberta have increased by 21% – faster than any other province.
In the prior period from 2009 to 2014, Alberta’s public sector grew by less than 1%. But over the past few years, the number of public sector jobs has grown rapidly, increasing by 21% since June 2014. To put that into perspective, BC has the second highest public-sector growth over this time period with just under 10% growth.
Statistics Canada Table 14-10-0288-01
Alberta retail sales: Approaching $7 billion, an all-time high
Retail sales are fueling Alberta’s economic recovery, reaching record highs in 2018. While June saw a slight decline from May’s record setting levels, June’s number’s show strong improvements since the beginning of the year and a 2% increase from the same month last year. Albertans continue to outspend all provincial peers with per capita retail sales in Alberta about $225 higher than the national average.
It’s important to note prices are also increasing in Alberta, which could contribute to the higher value of retails sales. Furthermore, some retailers may still be struggling as their costs also continue to rise, without the revenue to match.
That said, Albertans continue to spend greater amounts at local businesses – another indicator that suggests Alberta’s economy is emerging from the downturn.
Source: Statistics Canada Table 20-10-0008-01; June of each year.
Keeping trade free: The benefits of NAFTA
It’s now a year after the NAFTA renegotiations officially began. Here are some stats illustrating why it’s important keep trade free in North America.
Since NAFTA came into effect in 1994, the North American economy has more than doubled. With the aid of freer trade, the North American economy accounts for 23% of the world’s GDP, with less than 7% of the global population.
Trade and investment
Alberta businesses sent $68 billion, or 86% of our total exports, to the United States in 2016, with 17 of our top 20 export destinations being U.S. states. Specifically, there are over 1,900 U.S.-based companies that supply equipment, parts, and services used in Alberta’s oil sands.
Our NAFTA partners invested C$393.8 billion into Canada in 2016, with Canada being the top export destination for 35 U.S. states. American exports into Canada are up 181% since 1993, the year before NAFTA came into effect.
View this infographic for more on why we need to keep trade free in North America.
October 9, 2018: Unemployment rate
8.2% – Calgary’s unemployment rate in September
Calgary’s unemployment rate remained steady at 8.2% in September. This represents an increase from the average unemployment rate in Calgary over the last 12 months of 7.9%. It is also higher than the provincial rate of 7.0% and Edmonton at 6.3%
Calgary has the highest unemployment rate among all major Canadian cities, more than two percentage points above the national rate.
Alberta’s unemployment rate increased to 7.0% in September from 6.7% last month. Remaining stable with Alberta’s average unemployment rate over the last 12 months of 7.0%.
Employment increased by 63,000 in September, driven by an increase in part-time employment. This brought about a small decrease in the country’s unemployment rate to 5.9%.
In the past year, Canada added 222,000 jobs, largely the result of growth in full-time work.
7.9% unemployment rate in Calgary (July 2018)
Calgary’s unemployment rate has gone up from 7.7% in June to 7.9% in July.
Calgary has the highest unemployment rate among all major Canadian cities, and two percentage points above the national rate. Calgary now has 13,700 fewer jobs compared to January 2018 and 10,200 fewer than this time last year.
Alberta’s unemployment rate also went up slightly to 6.7% in July. Although there was a rise in part-time positions last month, it did not fully offset the decline in full-time positions resulting in a net loss of 3,600 jobs across the province.
Compared to this time last year, employment figures have been improving across Alberta, with 40,000 total jobs added.
In the past year Canada added 246,000 jobs, largely the result of growth in full-time work. Canada’s unemployment rate now sits at 5.8%.
Canada’s July employment gains are largely attributed to public-sector growth, as private-sector jobs were virtually unchanged. Compared to last year, public-sector employment has increased by 132,000, while the private-sector has increased by 69,000 jobs.
2.6% job vacancy rate in Alberta (Q1 2018)
The job vacancy rate tracks how many jobs are going unfilled relative to the total number of jobs. A high vacancy rate may suggest that businesses are having a difficult time finding employees – or finding ones with the right skills. A lower vacancy rate – as experienced recently in Alberta – can be a sign of a struggling economy.
Alberta’s 2.6% job vacancy rate has increased since 2016 – Calgary and Edmonton have the lowest within the province – but remains below the national vacancy rate of 2.9%. BC has the highest vacancy rate among the provinces at 4.2%.
7.7% unemployment rate in Calgary
Calgary’s unemployment rate is the highest among all major Canadian cities. There are nearly 70,000 unemployed Calgarians, with our city losing nearly 4,600 jobs between May and June. While the picture may seem gloomy, Calgary’s labour market has seen improvements over the past few years.
Stats Canada Table 14-10-0294-01
The Unemployment rate in Calgary (August 2018)
8.2%; Calgary’s unemployment rate in August
Calgary’s unemployment rate increased for the second month in a row from 7.9% in July to 8.2% in August.
Calgary has the highest unemployment rate among all major Canadian cities, and more than two percentage points above the national rate. Calgary now has 14,500 fewer jobs compared to this time last year.
Alberta’s unemployment rate remained steady at 6.7% in August. Compared with this time last year, employment figures have been improving in the province, with 53,000 jobs being added.
Employment decreased by 52,000 in August, this is largely a result of a decline in part-time employment. The employment decrease in August has brought the country’s unemployment rate up slightly to 6%.
In the past year Canada added 172,000 jobs, largely the result of growth in full-time work.
Alberta 2018 budget update
The Alberta Government’s quarterly fiscal update is forecasting a $7.8 billion deficit – $1 billion lower than was announced in Budget 2018, due to greater than anticipated revenue.
Revenue was up $1.2 billion from $49.1 billion. This increased revenue was due to higher than anticipated personal income tax, resource revenue, and federal transfers.
Spending levels stayed relatively consistent with those forecasted in Budget 2018. Debt levels remain around $53-billion by year-end.
This quarterly update does not change the long term forecast for a balanced budget by 2023-24. The plan to balance by 2023-24 relies on continued economic growth, and the completion of three pipeline developments, including Trans Mountain. No changes were made to account for the loss of revenue from higher carbon taxes expected after 2021, after Premier Notley announce Alberta will pull out of the federal climate plan, after the Trans Mountain pipeline approval had been quashed.
Canada is ranked 18 out of 190 countries on the ease of doing business, in the World Bank “Doing Business” 2018 report.
Canada is becoming less competitive
The World Bank “Doing Business” 2018 report ranks 190 countries on how their business regulations impact the ability to start and run a business. In the 2018 report, Canada ranked 18th overall and by comparison, the United States ranked 6th. Canada’s corporate tax rate was identified as an advantage relative to the United States, but since the writing of this report, the United States has implemented a major tax cut and regulatory reform bill.
Coupled with the loss of Canada’s corporate tax advantage relative to the United States, an increasingly uncertain investment climate is forcing investors to reconsider deploying long term capital in Canada. In 2017, total capital spending on Canadian oil and gas was down 19% from 2016, and 44% from 2014. In comparison, capital spending on oil and natural gas in the U.S. last year increased by 38% to $120 billion.
Increasing regulatory burdens are a key factor deterring large capital investments, especially in Canada’s energy sector. There are up to 50 policy and regulatory initiatives currently being considered by the federal and provincial governments that could undermine investor confidence in Canada’s energy sector.
This report also highlights that in Canada, it is relatively easy to start a business – we are 2nd best out of the 190 OECD countries, however, Canadian businesses face issues scaling up. Only a tiny fraction, 0.1%, of all businesses grow past the 100-employee mark – and this is 40% lower than in 2001. Less than 2% of medium-sized firms (100-499 employees) become big businesses, which are key drivers of workforce productivity, job growth, and business efficiency.
October 2, 2018
Inflation in Calgary
2.26% – Calgary’s headline inflation over the last 12 months
Prices are increasing in Calgary
From August 2017 to Aug 2018, headline inflation in Calgary increased by 2.26% .
Transportation costs were the primary cause of inflation, increasing by almost 6% over the past year. Increasing food (1.5%) and shelter (1.74%) costs also contributed to the increase in Calgary’s inflation rate.
Inflation in Calgary (2.26%) was slightly lower than Alberta (2.27%) over the past year, but both the city and the province had higher inflation than the rest of Canada (2.15%).
Uncertainty around NAFTA negotiations along with retaliatory tariffs on different products have put upward pressure on prices in Canada and the United States.