Edmonton-based ATB Financial is predicting a slow crawl in Alberta’s economic growth, due in large part to a “sluggish” oil and gas sector that is putting a damper on job creation and consumer spending.
The financial institution’s newest economic outlook forecasts 0.8% real GDP growth this year, up marginally since May, when growth was forecasted at 0.7%.
“Alberta’s economy is facing challenges from all sides — from the lack of pipeline capacity to trade wars — which is why ATB is forecasting marginal growth this year,” ATB’s Chief Economist Todd Hirsch said in a release.
According to the latest report, Alberta’s economy is “stuck in low gear” while it waits for new pipeline capacity needed to move more Alberta oil to market.
The report said capital spending in the oil and gas sector is down 3% compared to 2018 and down 55.4% compared to the record set in 2014, and is expected to remain soft until there is more assurance that the pipeline projects will be completed.
Transportation challenges have also affected the province’s natural gas sector, which was already dealing with a longstanding abundance of supply in the North American market and lack of access to overseas consumers.
Additionally, the report noted job creation has been “tepid.”
The Alberta labour force has grown by 25,200 since the end of 2018, during which time only 2,400 new jobs were created. As a result, the number of unemployed Albertans has grown to 6.9% for far in 2019, up from 6.6% in 2018, and higher than the national unemployment rate, which has averaged 5.7% over the first seven months of the year.
Weak consumer spending, the report noted, is both a reflection of the overall weakness in the provincial economy and a contributor to it. Alberta consumers spent $26 million less in June than they did in May, down 0.4% month-over-month and 1.1% year-over-year. Consumer spending contracted in four of the first six months of 2019, the report said.
For 2020, ATB forecasts Alberta’s growth to be 2.0%.
“We are forecasting growth of 2.0 per cent in 2020 assuming some of the transportation issues clogging up the oil patch will be resolved and investment in new production will increase,” Hirsch said.
For more details, read the complete ATB Financial Alberta Economic Outlook.