Alberta's economy continues full steam ahead, says RBC Economics
Increasing bottlenecks pose risks to growth
TORONTO, June 22, 2006 — Alberta remains among
the country's top economic performers with expected growth
of 4.7 per cent in 2006 and 3.8 per cent in 2007, according
to a provincial economic outlook released today by RBC Financial
Group.
"Alberta's economy is expected to grow ranking second
of all provinces this year and will move into the lead in
2007," said Craig Wright, vice-president and chief economist,
RBC. "While, we continue to believe that Alberta's thriving
energy sector has been crowding out the competitiveness of
other industries, mounting bottlenecks, such as labour, are
now posing a risk to the energy patch itself."
Great long-term potential exists for the energy sector, due
in part to a changing technology that has dropped the break-even
cost of developing the world's second largest oil reserves
to the US$25-$35-a-barrel range. In the meantime, however,
the speed at which projects can proceed in the short-term
is at risk due to supply shortages in several sectors that
cannot keep pace with demand.
RBC notes that strains are also present within Alberta's
labour markets where average weekly earnings are growing at
more than four times the rate of just three years ago. Skilled
labour shortages remain prevalent. While Alberta is attracting
workers primarily from Saskatchewan and Ontario, the worker
in-flows are inadequate and the tight constraint of Canadian
immigration targets limits the potential use of international
workers. Furthermore, annual core consumer prices, excluding
food and energy are now growing three full percentage points
faster than they were just 18 months ago.
In addition, Alberta's fiscal policy conditions are looking
considerably less rosy than before. "If sustained throughout
the current fiscal year, then recent developments in oil and
gas prices will shave roughly $2.1 billion off of Alberta's
surplus. Last year's $7.4 billion surplus is best viewed through
a rearview mirror," said Wright.
While regional differences exist across the country, Canada
is well positioned to absorb global economic shocks as a result
of geographically diversified investments, a strong consumer
sector and sound fiscal policy. Newfoundland and Labrador
will be the provincial growth leader this year with activity
in the oil and nickel sectors driving growth. After Newfoundland
and Labrador, the strongest economies will be west of the
Manitoba-Ontario border for 2006.
The RBC Economics Provincial Outlook assesses the
provinces according to economic growth, employment growth,
unemployment rates, personal income growth, retail sales,
housing starts and the Consumer Price Index.
According to the report (available online as of 8 a.m. E.D.T.,
at www.rbc.com/economics/market/pdf/provfcst.pdf), provincial
forecast details are as follows:
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For more information contact:
Craig Wright, RBC Financial Group Economics,
(416) 974-7457
Derek Holt, RBC Financial Group Economics,
(416) 974-6192
Kathy Bevan, RBC Financial Group Media Relations,
(416) 974-8810
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