DOWNSIDE RISK TO THE FORECAST:

  • If recent job losses in the Calgary market continue into 2020, this will create further uncertainty. It will also impact consumer confidence and housing market activity.
  • If new-home construction projects exceed anticipated demand growth, this will slow the downward adjustment in overall housing supply. This will impact price stabilization in the resale market.

WHAT’S THE UPSIDE?

  • Potential regional changes to mortgage rules may open up more opportunities for resale transactions. Any further decreases in mortgage rates will improve sales activity.
  • Positive momentum in pipeline construction could improve consumer confidence and job prospects.

The Alberta economy continues to struggle. 2019 marks the fifth year since oil prices first collapsed. Following widening price differentials and continued difficulties getting energy product to market, we saw governments step in with production curtailments. This helped narrow the spread on price, likely preventing further pullbacks, but it also weighed on energy investment activity and overall economic growth.

The continued challenges have caused Alberta to move into the category of slowest growing economy in 2019 compared to other provinces. Shifts to ease curtailments in 2020 and additional transportation capacity are expected to support some economic growth this year. However, global risk will likely create volatility in oil prices and Investment activity is not expected to change, remaining at half the levels that were seen prior to the 2014 oil price crash.

While several mechanisms have been put in place by the provincial government to encourage business investment and support diversification, at the same time, recent budget constraints could impact growth in the public sector. The shifts to encourage business investments will likely take longer to take hold, while the easing in the public sector will be more immediate. The result is an economy that is expected to be marginally better in 2020, keeping housing markets stable at lower levels in 2020.

 

KEY FACTORS IMPACTING THE ECONOMY IN 2020:

  • Oil production curtailments in Alberta are expected to ease and shipments by rail are expected to increase. This should support improvements in economic growth this year.
  • Tighter provincial budgets will likely place some drag on economic growth and employment this year.
  • Concerns that global growth could cause volatility in energy prices, coupled with continued regional challenges, point toward no significant shift in energy investment activity, which might impact future job growth.
  • Alberta’s labour market is expected to continue to face challenges related to high unemployment and weak job prospects.
  • While population growth is far lower than we are used to in this province, growth levels remain comparable with the rest of the country and reflect a new normal marked by lower levels of growth.
  • Global economic concerns and economic risk are expected to keep inflation low, causing many to call for lending rate cuts this year. Any easing can help prevent further declines in the housing market, but it will likely continue to contribute to the divergent trends in the market.

Most economists expect global growth to slow, as trade conflicts and investor anxiety are weighing on markets.

The slowing trend has caused many international central banks to ease their monetary policy in response to weaker growth prospects and soft inflation. The U.S. economy is not immune to this, as its pace of growth is expected to ease due to reductions in investment and manufacturing production. However, most expect the U.S. economy will not move into a recession, as they are still benefiting from a strong labour market that is spurring wage gains and consumer spending.

Similar trends are also expected in Canada. While the economy in 2019 was supported by a healthy labour market and recent turnaround in housing, global trade conflicts and related uncertainty dampened business investment and export activities. In 2020, most of the growth is expected to be driven by consumer spending and housing activity recovery, but investment and exports are anticipated to grow moderately.