Economists at TD Bank say they are looking at upgrading their Alberta growth expectations for 2019 as signs point to a more robust than expected recovery from the effects of extreme heavy oil price weakness in late 2018.
Encouraging data points are forcing economists to consider upgrading their expectations for weak 2019 economic growth in Alberta as the province continues to recover from the effects of extreme heavy oil price weakness late last year.
The provincial economy appears to have started growing again in recent weeks, based on stats showing rising oil exports by pipe and rail, stronger wholesale and manufacturing shipments and a jump in small business confidence, says a report from TD Economics released Tuesday.
TD Bank says Alberta’s battered economy is headed in the right direction, but warns there are still a number of hurdles that could hinder recovery.
“It was a nice bounce back last year, but growth is settling down this year and we’re of the mind that you’re going to get a continued moderate growth run over the next couple of years as the economy kinds of settles down,” Burleton said in an interview.
“I don’t think many were anticipating a heroic recovery despite the fact that the recession was quite deep.
“Oil production should grow despite some of the challenges in terms of pipelines. That’ll get us two per cent which is not heroic.”
Burleton said Alberta’s economy is within a year of returning “home” a term used to characterize full recovery from a recession. However, it could be another two years before the job market fully recovers.
“Employment is back to where it was pre-recession, but a lot of the jobs are self-employment, more of a freelance type,” he said.
“Employers are kind of slow and part of that does reflect the lacklustre investment outlook over the next couple of years.”
The report also notes that government hiring, primarily in the health and education sectors, rose by nearly 10 per cent. Private sector jobs fell by five per cent during the recession.
In its update report, however, it says the provincial economy appears to have started growing again in recent weeks, based on rising oil exports by pipe and rail, stronger wholesale and manufacturing shipments and a jump in small business confidence.
It also cites an improvement in the jobless rate and positive population growth, along with more upbeat trends in Alberta’s stalled retail sales and housing sectors.
The economists stop short of an immediate upgrade in their forecast, however, noting the volatility of regional statistics and the newly elected provincial government’s likely move to restrain spending.
“All in all, recent encouraging data have added credence to the view that economic growth in Alberta is gaining some traction,” the report says.
“While a continuation in this momentum would set the stage for a forecast upgrade, we remain cautious for now.”
“We still are of the mind that the economy will reassert itself,” he said.
“It may be a bit at odds given the timing of this report just after the Trans Mountain decision and some of the concerns around the oil and gas sector.”
The forecast says there is reason for optimism, including the resiliency of global oil demand and limited supply outside of Alberta, and decreasing production costs.