Download: 2016-17 Third Quarter Economic Outlook
The Alberta economy is expected to expand modestly in 2017, driven by oil and manufacturing exports, public sector infrastructure spending and reconstruction in Fort McMurray. After declining an estimated 2.8 per cent in 2016, real GDP is forecast to grow 2.4 per cent in 2017.
Nominal GDP, a broad measure of income, is forecast to improve by 5.5 per cent this year, but will remain 12 per cent below the 2014 peak. As the economic recovery begins to take shape, business and household incomes, in addition to government revenue, will remain well below pre-recession levels.
Figure 1: Alberta economic indicators
Oil prices improved near the end of 2016 and have maintained some momentum in early 2017. The oil price forecast for 2016-17 has been revised to US$48/bbl, up US$6/bbl from Budget 2016, but elevated inventories and increased drilling and crude oil production in the U.S. are expected to limit price gains in 2017.
Alberta’s real exports are expected to increase significantly in 2017, led by growing oil production and manufacturing. Alberta’s non-conventional oil production reached the highest level on record in late 2016, and bitumen production is forecast to increase further in 2017 as several projects come on line.
In addition, the improvement in activity has boosted manufacturing, which posted broad-based increases in major categories at the end of 2016. After declining by two per cent in 2016, real exports are expected to grow by 4.4 per cent in 2017.
Figure 2: Alberta business output indicators
Drilling began recovering in mid-2016, and in January 2017 the number of active drilling rigs reached the highest level since early 2015. The improvement in activity is expected to carry through 2017 and increase conventional investment by over 20 per cent.
Outside the energy sector, investment continues to be hampered by declining private sector construction spending. Many construction projects underway prior to the oil price drop are winding down, and permit data suggests this weakness will carry into 2017.
Corporate profits were lower than expected in 2016 due to weaker economic activity and losses associated with the Wood Buffalo wildfires. Improving oil prices and increased activity are expected to boost corporate profits in 2017, but given the steep decline in profits during the recession, net operating surplus is forecast to remain well below 2014 levels.
Alberta’s population continues to grow, but at a slower rate. After solid growth of 1.8 per cent in 2016, Alberta’s population is forecast to expand by 1.3 per cent in 2017. Net interprovincial outflows have accelerated in recent quarters, but strong immigration and natural increase will support growth and keep it above the national average.
Alberta’s labour market has begun to show signs of improvement, as employment has increased by nearly 18,000 jobs since lows in July 2016. Employment is expected to post further gains in 2017, growing by 0.9 per cent. The unemployment rate is forecast to drop from current levels to an average of eight per cent for the year.
Figure 3: Alberta labour market
A partial recovery in household earnings is expected this year, following declines in the past two years. Average weekly earnings are forecast to grow by 0.7 per cent in 2017, down from one per cent at Budget 2016. This modest gain in earnings will support a 1.8 per cent growth in personal income.
Consumer spending is expected to edge higher in 2017, with real spending forecast to grow by 0.7 per cent in 2017. Inflation is expected to be a modest 1.9 per cent.
Updated economic and energy price assumptions
9 Month Actual
|2016-17 Budget||2016-17 3rd Quarter|
|WTI Oil Price (US$/Barrel)||45.00||46.61||42.00||48.00|
|Light Heavy Differential (US$/Barrel)||13.40||13.71||15.20||14.21|
|Natural Gas (Alberta Reference Price Cdn$/GJ)||2.21||1.85||2.40||2.15|
|Exchange Rate (US cents/Cdn$)||76.3||76.4||73.5||76.0|
|2015||2016 Forecast||2017 Forecast|
|Economic Growth (% change in Real GDP)||-3.6||-2.8||2.4|
|Employment (% change)||1.2||-1.6||0.9|
|Unemployment Rate (%)||6.0||8.1||8.0|
For more information, read: 2016-17 Third Quarter Economic Outlook