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Albertas Economic Prospects and Regional Impacts Presentation to CAEP REDA March 3, 2011 Slide 2 Albertas Economic Prospects and Regional Impacts CAEP Presentation March 3, 2011 Slide 3 Is World Economys Recovery Sustainable? Uneven global recovery, with widespread financial and fiscal turbulence Weak recovery in Europe: ongoing financial risks due to Greek and Irish crises; German economy doing very well Modest recovery in North America; new round of quantitative easing in US improves US outlook Sharp recovery in emerging markets, led by China, India and Brazil (but some risk for China) Very high government debt: Japan, Ireland, Italy, US, UK Removal of fiscal and monetary stimulus needs to be done carefully Very weak labour and housing markets in US Political instability in Middle East may disrupt oil supplies Slide 4 Canada in Better Shape than US? Canadas recovery is built on strength of domestic economy, but stronger revival in US employment is key to maintaining momentum in 2011 Economic growth was weaker than expected in Q3, but rebounded in Q4 10 Budding core inflation, higher energy prices and rising sales taxes have prompted BoC to start lifting rates High commodity prices will keep Loonie strong Real GDP growth of 3.1% in 10; 2.7% in 11 as domestic economy and government spending cools Slide 5 Alberta on the Rebound Alberta is now out of recession: high energy prices; global recovery; surging oil investment Albertas GDP fell by 4.5% in 2009: falling investment and exports; large 20%+ declines for manufacturing, agriculture, construction Strong employment gains in 2 nd half 10 and Jan 11 Budget: Alberta GDP up 3.5% in 10 (consensus +3.2%) Until 2008 the economy was growing at rates well beyond its capacity Recent slowdown has eased pressures on housing and infrastructure and reduced inflation Slide 6 Current Alberta Indicators Building permits up 2.1% in 10 Housing starts up 36% in 10 MLS sales down 14% Retail sales up 5.5%; car sales up 9.3% Oil production up 6.5%; gas production down 5.5% Employment down 0.4% Manufacturing sales up 10.9% Farm cash receipts down 5.9% Exports up 11.3% (high oil prices) Slide 7 Real GDP Growth Alberta vs. World, Canada and U.S. Sources: Statistics Canada, Bureau of Economic Analysis (historical); average of recent forecasts by Conference Board of Canada, and major Canadian banks; EIU (World) Slide 8 Unemployment Rate Alberta Economic Regions (January 2011) Source: Statistics Canada, Labour Force Survey Wood Buffalo Cold Lake 4.5% Athabasca-Grande Prairie 6.1% Edmonton Region 5.7% Red Deer Region 5.2% Banff-Jasper Rocky Mtn. House 5.9% Calgary Region 5.9% Camrose-Drumheller 5.0% Lethbridge-Medicine Hat 4.3% Provincial Rate 5.6% Note: regional and provincial rates are 3-month averages Slide 9 Industry Sector Prospects Rising value of the Canadian dollar may limit export growth to the US, but US outlook has improved Oil prices are relatively higher than natural gas prices; long-run oil prices driven by growth in China and India US shale gas means gas prices will stay low, but domestic demand for gas is on the rise (oilsands/power) High oil prices should stimulate investment in 2011 Agriculture prices have rebounded: growing demand in Asia and biofuels; COOL impacting livestock/meat Forestry prices are recovering, except for OSB prices Slide 10 Data and Analysis for Central Alberta Region (New REIR reports on http://www.albertacanada.com/about- alberta/regional-economic-indicators.html) Slide 11 Part of Central Region; non-member CAEP: Acme; Botha; Cremona; Delia; Linden; Morrin; Munson; Starland County; Ponoka County Member of CAEP; not part of Central Region: Castor; Halkirk; Paintearth Differences in Geography CAEP vs Central Region Slide 12 Central Alberta Indicators Slide 13 Population Estimates Source: Statistics Canada Slide 14 Population Estimates Source: Statistics Canada Slide 15 Age Pyramid 20-40 year-olds have smaller share in CA than in AB 0-20 have larger share 44+ identical shares Slide 16 Aboriginal Population Slide 17 Educational Attainment Slide 18 Regional Labour Force In 2009, regional labour force and employment continued to increase, but likely declined in 2010 Unemployment rate: 6.7% in 09 - up from 3.8% in 08; declined in 2010 Participation Rate: 72.7% (labour force/population 15+) Largest sectors in 09: Retail/Construction (about 20,000 each); Healthcare/Oil and Gas (15,000 to 20,000) Sectors with >10,000: Agriculture; Manufacturing; Other Services; Education 4,800 workers received EI in 09 (up from 1,500 in 08) EI down 42% Q4 09 to Q4 10; AB down 31% Slide 19 Labour Force Survey Slide 20 Regional Agriculture Number of farms: 10,477; 21.2% of AB Farm cash receipts: $1.75 billion; 17.7% of AB Land in crops: 3.8 million acres; 15.8% of AB Canola: 631,000 acres; 15.5% of AB Barley: 879,000 acres; 21.5% of AB Wheat (incl. durum): 824,000 acres; 12.7% of AB Value of livestock: $970 million; 19.4% of AB Cattle and calves: 1.21 million; 19.0% of AB Hogs: 599,000; 29.2% of AB Slide 21 Beef Industry Consolidating Source: Statistics Canada Herd reduction: US 3.9% down between 07 and 11 Canada and Alberta down 17% between 05 and 11 Slide 22 Pork in Precarious State Shrinking herd - Losses ongoing Smaller industry likely - Exchange rate key Source: Statistics Canada Slide 23 Regional Agriculture Sources: Statistics Canada and AAFRD Slide 24 Regional Manufacturing Sources: Statistics Canada Estimates for Census Division 8 (2/3 of CA population) In 2008, manufacturing shipments $7.5 billion, up 5.4% from 07 CD 8 accounts for 10.6% of Alberta manufacturing Employment 6,500: 4.5% of Alberta manufacturing jobs Largest sector: chemicals ($5.6 billion or >50% of AB) #2 sector: food ($630 million or 6% of AB) #3 sector: O&G machinery ($300+ million or 5% of AB) Slide 25 Regional Energy Gas production: 30.8 billion m 3 in 09, down 5.6% from 08 Oil production: 3.2 million m 3 in 09, down 5.3% from 08 Slide 26 Regional Energy 1,189 wells spudded in 09; down 52% from 08 16.4% of # of Alberta spuds Slide 27 Gas Prices to Remain Weak Slide 28 US Shale Gas Cause of Weak Gas Prices Source: U.S. Energy Information Administration Slide 29 Number of Businesses by Employee Size Source: Statistics Canadas Business Register Slide 30 Number of Businesses by Industry PSTS: Professional, Scientific and Technical Services FIRE: Finance, Insurance and Real Estate Source: Statistics Canadas Business Register Slide 31 Accommodation Sector Region had 84 accommodation properties with 4,500 rooms Average occupancy rate in the region was 47% Average room rate was $90 Slide 32 Personal Income Source: Alberta Finance & Enterprise Average individual income: $34,500 in 07; #6 of 14 regions Income grew 42% 03 07; #5 of 14 Slide 33 Consumer Prices Regional price levels are lower than the Edmonton benchmark level Shelter costs are also lower than in Edmonton Slide 34 Wages by Industry Alberta Wage and Salary Survey 2009 Central Alberta Region Alberta Average Hours Worked Average Hourly Wage Vacancy Rate Hiring Difficulties Average Hours Worked Average Hourly Wage Vacancy Rate Hiring Difficulties Total, All Industries37.0$21.873.8%42%37.3$24.343.0%41% Oil & Gas Extraction43.5$33.022.0%30%41.3$43.531.0%17% Construction45.6$26.362.8%52%42.3$28.503.0%61% Manufacturing40.4$23.572.6%56%40.1$24.701.4%54% Retail Trade34.0$17.353.4%40%33.7$17.312.3%41% Transportation & Warehousing43.0$24.156.6%54%42.2$24.313.7%51% Finance, Insurance & Real Estate35.8$22.801.7%26%36.3$24.021.5%33% Scientific, Technical & Professional Svcs39.2$28.281.7%66%39.2$34.561.5%45% Health Care & Social Services37.7$27.201.2%41%37.3$26.334.0%51% Accommodation & Food Services31.2$11.234.1%62%32.3$11.956.9%65% Source: 2009 Alberta Wage and Salary Survey Slide 35 Investment Source: Statistics Canada and CMHC CA housing starts: 1,076 in 10 up from 1,055 in 09 Housing units: 1,594 in 09; down 36% from 08 Economic Indicators: Central Region Major Construction Projects, As of December 31 Industry SectorNumber of ProjectsValue ($millions) 2010200920102009 Biofuels13$190$670 Commercial/Retail55$122$216 Infrastructure3136$634$684 Institutional2021$433$504 Power46$643$1,243.0 Residential117$201$130 Total10599$2,673$3,773 % of Provincial Total10.9%10.0%1.5%1.6% Source: Alberta Finance and Enterprise, Inventory of Major Alberta Projects Slide 36 Building Permits Building Permits: $442 million in 09; down 45% Slide 37 Conclusions World economy has emerged from recession Outlook is for slightly weaker growth in 11 many risks US economy needs to gradually unwind stimulus Alberta expected to see return to strong growth over medium term Oil prices at high levels, but gas prices are weak Rising US shale gas production is a threat Forestry prices are improving; strong agricultural prices Livestock inventories continue to decline (COOL) May need to look at other foreign markets for forest and agricultural products, e.g. Asia Weak US $ is a threat