OTTAWA, March 3, 2016 /CNW/ – Continued weakness in oil prices is expected to put Edmonton and Calgary in recession for a second consecutive year in 2016. Edmonton and Calgary can expect their economies to contract by 1.3 per cent and 1.2 per cent respectively, according to The Conference Board of Canada’s Metropolitan Outlook: Winter 2016.
The Conference Board’s President and Chief Executive Officer, Daniel Muzyka and Deputy Chief Economist, Pedro Antunes will be in Calgary today to discuss the outlooks for Calgary and Alberta at the Western Business Outlook 2016: Alberta.
“The dramatic decline in oil prices continues to weigh on both cities’ economies, and weak activity in the energy industry is spreading to other sectors,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. “Two of the hardest hit industries last year—manufacturing and construction—will continue to struggle this year, while conditions in the services sector will deteriorate.”
- Edmonton’s real GDP is expected to decrease 1.3 per cent in 2016, following a 1.8 per cent drop in 2015.
- Calgary’s economy is forecast to decline by 1.2 per cent in 2016, on the heels of a 2.4 per cent contraction in 2015.
- Vancouver’s real GDP is forecast to grow 3.3 per cent, making it the fastest growing economy among the 28 census metropolitan areas covered in this edition of the Metropolitan Outlook.
As home to the headquarters of numerous oil and gas companies, Calgary has been hit hard by layoffs related to the falling oil prices. In fact, Calgary’s real GDP is expected to decline by
1.2 per cent in 2016, on the heels of a 2.4 contraction last year. Employment started to weaken in the second half of last year and that trend is expected to continue into 2016. Employment is projected to fall 2.1 per cent this year, causing the unemployment rate to jump to 7.5 per cent, surpassing the national average for the first time since 1987.
The economic downturn starts with the resources, agriculture and utilities sector, which includes mining and oil and gas extraction. Output fell by 4.5 per cent last year, as a number of oil companies cut their drilling and investment plans in response to the drop in oil prices. Given that energy companies remain cautious about their investment plans, resources, agriculture and utilities output is forecast to remain essentially flat this year.
Calgary’s manufacturing and construction sectors, have both been hit hard by the drop in oil prices, posting double digit output declines last year. Unfortunately, a similar outcome is expected this year. In fact, manufacturing output is projected to decline an additional 7.9 per cent in 2016, while construction output is forecast to fall by a further 6.7 per cent. The downsizing in the oil industry has led to a glut of unused office space, the current vacancy rate will discourage new investment in office buildings and non-residential construction. At the same time, housing starts are forecast to fall by 18 per cent in 2016.
The overall services sector is also set to fall by 0.5 per cent this year, led by declines in wholesale and retail trade, transportation and warehousing, business services, and personal services. In particular, output in the wholesale and retail trade sector is forecast to tumble 5 per cent as consumers cut back their spending.
With oil prices expected to remain weak this year, the outlook for Edmonton’s economy is also negative. Further declines are anticipated in several industries—all three industries included in the goods sector and half the industries included in the services sector. The resources, agriculture and utilities sector, one of the area’s biggest industries, is forecast to see output contract by 0.2 per cent. Output in the manufacturing sector, which is closely linked to the energy industry, is projected to fall by 6.3 per cent. Meanwhile, an anticipated one-third decline in housing starts is expected to push construction output down by 4 per cent. On the services side, wholesale and retail trade output is projected to experience the biggest contraction at 4.7 per cent, as retail sales fall for the first time since 2009.
Edmonton’s job market will feel the effects of the economic downturn this year. Employment is expected to edge down by 0.4 per cent, causing the unemployment rate to rise 7 per cent, its highest point since 1997. In all, Edmonton’s real GDP is expected to contract by 1.3 per cent in 2016, following a 1.8 per cent drop in 2015, the first back-to-back declines since 1991-92.
Released today, Metropolitan Outlook: Winter 2016, is The Conference Board of Canada’s once-a-year analysis of 28 Canadian census metropolitan areas (CMAs).