Varcoe: Alberta's financial development to hit 'velocity bump' in 2024, however nonetheless stay amongst nation's leaders

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Heading into a brand new yr brings a contemporary outlook — and new challenges — for Alberta enterprise operators.

Even with increased rates of interest and questions concerning the Canadian financial system, there are nonetheless causes for optimism as 2024 approaches for enterprise operators equivalent to Mogens Smed, founding father of Calgary-based building know-how firm Falkbuilt Ltd.

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The corporate, which has expanded from six to 540 workers because it was fashioned in 2019, has watched its enterprise circumstances enhance from a yr earlier, when the financial system was nonetheless popping out of the pandemic.

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“We noticed lots of issues that we thought could be coming again by 2023 which have completely pushed into 2024 — however 2024 is trying actual robust proper now,” Smed mentioned Wednesday.

“We will definitely be hiring at the least one other 50 or 60 individuals within the subsequent six to 9 months. No query about it.”

However what does the brand new yr maintain for Alberta’s mercurial financial system, inflation-weary customers and battle-hardened companies?

That’s a query many enterprise leaders and specialists are considering with lower than three weeks remaining in 2023.

Three new financial forecasts launched over the previous week paint a sophisticated image of the Alberta financial system, though a remarkably constant outlook is anticipated for 2024.

A slowdown is probably going, but it surely’s not a full cease on financial enlargement, in line with reviews by RBC, Alberta Central and ATB Monetary.

Alberta is predicted to see among the many strongest development within the nation subsequent yr.

But, the outlooks additionally warning that the province’s financial system is decelerating with a number of challenges forward, together with the continuing squeeze from increased borrowing prices and the potential for a tough touchdown for the Canadian financial system.

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With oil costs closing beneath US$70 a barrel on Wednesday and benchmark U.S. pure gasoline costs buying and selling at $2.34 per million British thermal items, volatility additionally continues to hit the province’s largest sector.

“We see Alberta proceed to outperform within the present setting. We’re calling it a velocity bump within the quicker lane,” ATB chief economist Mark Parsons mentioned in an interview.

“Now we have increased rates of interest going to subsequent yr . . . we see some weak spot on the buyer aspect, however continued power in different areas.”

ATB forecasts the provincial financial system will develop by 2.1 per cent subsequent yr, down from 2.7 per cent anticipated in 2023.

After main the nation in financial development in 2023, Alberta’s gross home product (GDP) will increase by 1.7 per cent subsequent yr, in line with RBC Economics.

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And Alberta Central is projecting the province’s financial development will gradual to 1.8 per cent in ’24.

Continued inhabitants development and strong power costs ought to see the province outpace its counterparts, mentioned Alberta Central chief economist Charles St-Arnaud.

“Alberta usually ought to do higher than the remainder of the nation, however the query is: The place is the remainder of the nation?” he added.

“If Canada as an entire has a tough touchdown, then Alberta can have a tough time to flee that.”

Specialists level to the financial tailwinds being generated by worldwide and interprovincial migration, and stable commodity costs.

The province’s inhabitants elevated by greater than 4 per cent, or 184,000 individuals, for the 12 months ending in July, which is the very best charge recorded because the early Eighties, though it’s anticipated to gradual in 2024.

“A flourishing inhabitants, alone, received’t be sufficient to protect Alberta’s financial system from moderating additional in 2024,” the RBC report states.

RBC economist Rachel Battaglia factors out that Alberta households stay closely indebted in comparison with most different provinces, and there are indicators customers are responding to increased borrowing prices.

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Retail gross sales per individual are down from a yr earlier, whereas Alberta’s “red-hot housing market has additionally proven early indicators of cooling,” the financial institution states.

“We’re nonetheless fairly bullish on the Alberta forecast, however we’re beginning to see a few of that weak spot . . . in order that’s why now we have Alberta slowing down in 2024, earlier than now we have it ramping again up in 2025,” Battaglia mentioned.

As typical, power markets can be a giant driver for funding within the province.

World demand for oil and gasoline might gradual in 2024 if the worldwide financial system weakens, though the startup of the Trans Mountain pipeline enlargement subsequent yr is predicted to shrink the worth low cost on Western Canadian Choose heavy oil.

RBC is forecasting costs for benchmark West Texas Intermediate crude will common about US$78 a barrel subsequent yr, up barely from this yr’s degree.

And there are different indicators of robust capital funding, highlighted by Dow Inc.’s resolution to start building subsequent yr on an $8.9-billion net-zero ethylene cracker and derivatives complicated, to be in-built Fort Saskatchewan.

“That’s a stable vote of confidence for Alberta to be attracting that type of funding on this rate of interest setting,” Battaglia added.

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On the roles entrance, ATB is anticipating labour development to chill to 1.8 per cent subsequent yr, whereas the unemployment charge inches as much as 5.9 per cent.

In the meantime, sentiment for enterprise operators has been enhancing, regardless of issues across the state of the nationwide and international economies.

The newest quarterly survey by Statistics Canada on enterprise circumstances, performed between October and early November, discovered 62 per cent of Calgary enterprise respondents are hopeful about their firm’s outlook for the following 12 months, up from 58 per cent a yr earlier.

Fewer companies say they’re seeing labour shortages in contrast with a yr in the past, though rising inflation and better rates of interest are obstacles, famous the Calgary Chamber of Commerce.

“Companies are extra optimistic,” mentioned chamber CEO Deborah Yedlin.

“Whether or not it’s power, agriculture or different pure sources . . . we’re not going to be as affected by financial challenges in different elements of the nation due to what now we have right here.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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