After a very sharp decline in Q3 2016, employment in the Edmonton Census Metropolitan Area (CMA) stabilized in the first half of 2017 and began to expand. However, average weekly wages have eased as the number of hours worked fell and employment in some high-paying sectors, such as manufacturing and construction, declined.
With renewed employment growth and very low inflation, disposable income across the Edmonton region will improve, helping to sustain activity in the housing, retail and personal services sectors. As a result, Real Gross Domestic Product (GDP) for 2017 in Edmonton is estimated to be in the range of 1.8%.
In 2018, economic growth should pick up noticeably to the range of 2.5% as the economies of Alberta and Edmonton continue to recover—assuming North American benchmark oil prices return to $50-55 USD range. These growth rates, however, will be very modest when compared to the 3.5 to 4% rates experienced between 2010 and 2014.
Moderate growth prospects for the global economy and continuing uncertainty as to oil production levels by the Organization of the Petroleum Exporting Countries (OPEC) and the United States will mean that energy prices are likely to remain highly volatile. While prices are expected to improve during 2017 and into 2018, a considerable downside risk with respect to energy prices could have negative implications on the economic outlook for Edmonton and Alberta.
Global and North American Developments
In the first half of 2017, global economic growth moved forward at a slightly stronger pace.
In the United States, housing, income and employment levels continued to rise. Increased export and stronger business investments will form a strong basis for the United States' economic growth that is expected to remain relatively robust into 2018. The new United States administration has indicated it wants to sharply reduce corporate income taxes and boost infrastructure spending. If these policies are implemented, the United States' economic growth in 2017 could exceed current expectations.
In spite of risks arising from Britain’s proposed exit from the European Union (Brexit), economic activity in the Euro Zone held up well in the first half of 2017. Decreased energy prices and modest but steady employment growth helped boost investment and consumer spending. However, the uncertainty as Brexit negotiations unfold over the remainder of this year and into 2018 as well as ongoing concerns about European financial institutions will limit growth in 2017 to about 1.9%.
After a poor start to 2017, emerging market economies were stronger in Q2 2017 as China, Brazil, South Africa and Russia all grew at slightly faster than expected rates. Financial and housing market conditions in China appear to have stabilized with growth now expected to come in at 6.7% for 2017. However, with continuing low commodity prices, performance in other key emerging markets is unlikely to improve significantly until later in 2017.
The International Monetary Fund expects the global economy to grow at 3.5% in 2017–
unchanged from the April 2017 World Economic Outlook report (see the “Percent Real GDP Growth” chart). Global growth will rise in 2018 to 3.6% as the advanced countries accelerate and emerging economies see more robust growth.
Percent Real GDP Growth. Source: International Monetary Fund
After a sharp downturn in Q2 2016 resulting from the Fort McMurray fires and oilsands
shutdown, growth in Canada rebounded in the remainder of 2016. For 2017 as a whole,
economic growth in the country will be at a very respectable annualized rate of about 2.7%.
Prospects for Alberta are improving, with all commentators calling for a recovery in 2017 as levels of activity in the energy, manufacturing and construction sectors expand. Growth for 2017 is expected to be at 2.4% and at 2.5% in 2018.
However, the start of renegotiations on the North American Free Trade Agreement increased uncertainty with respect to Canadian export performance could dampen growth prospects for both Alberta and Canada over 2017.
Oil prices US $ per Barrel. Source: Bloomberg
Current Economic Developments in Edmonton and the Region
Employment in Metro Edmonton. Source: Statistics Canada
Edmonton Metro Area’s CPI Inflation. Source: Statistics Canada
City of Edmonton – Housing Starts. Source: Canada Mortgage and Housing Corporation
After two years of contraction in Alberta, recovery now appears to be underway. Rising employment numbers in the last two quarters combined with continuing population growth helped to steady retail, personal services and other components of both the region’s and the city’s economies over the first half of 2017.
Looking forward, growth will continue to improve in the province, the region and the city. Inflation adjusted gross domestic product Edmonton is expected to grow by 1.8% in 2017 and then increase to the 2.5% range in 2018.