Since our previous update, the hottest headline has been interest rates and the Bank of Canada’s decisions to continue to increase rates to bring inflation down as quickly as possible. However, core inflation has remained sticky.
Economic activity has been much higher than expected, due largely to the steady stream of people moving to Canada. Stripping away the effects of population growth, however, the Bank of Canada’s rate hikes appear to be working, as GDP per capita is declining.
These interest rate decisions have been taking their toll on Albertans. While wages have finally grown more than prices, more Albertans are grappling with high debt-to-income ratios, increased housing costs, and insolvencies. Many Albertans now feel the economy is getting worse.
Alberta businesses, however, do not appear to be deterred by increasing interest rates, as many plan to increase investment over the next year, expect higher sales, and plan to increase employment.
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Report Highlights:
A Positive Outlook: Alberta businesses are generally optimistic about the economy with strong sales and hiring expectations over the next year and are eager to invest in the province (despite the rising cost of capital). Despite some moderation in activity, the economic outlook is positive as commodity prices remain strong and new projects are expected to come online.
Bigger Pie. Bigger Slices?: While Alberta’s economy is set to grow as more people move to the province, it remains unclear whether that growth will mean more prosperity for everybody. GDP forecasts appear strong, and so does the labour market but many individual families are feeling poorer.
Finally, Some Wage Growth: While it has been stubbornly slow lately, wage growth in Alberta appears to be warming up and is now outpacing inflation for the first time in years. Time will tell if this growth holds over the long term, which would be a welcome respite for Albertans who have been struggling financially.
The Toll of Inflation (Part 1): While wage growth in Alberta is warming up, interest rates and inflation are taking their toll on household finances as insolvencies rise and economic optimism falls.Additionally, the Bank of Canada is expected to raise rates even more, intensifying the pressure on Albertans.
The Toll of Inflation (Part 2): Consumer demand and economic growth in Canada have been higher than expected due to an increase in population, but stripping that away, GDP per capita is in fact declining, with expectations to decline further. This could be a sign that elevated interest rates are working to cool the economy.
If you would like to use this report in a publication, please use the following citation.
Business Council of Alberta. Summer 2023.
Alberta Snapshot: A Quarterly Economic Update for Alberta.
Background:
We know there is so much economic data and information out there, and that you want a way to see it all in a snapshot with a view looking forward and not just back. That’s why we created the Alberta Snapshot, a quarterly executive summary that helps you keep the pulse on what is happening in Alberta’s economy—the good, bad, and urgent.
We use a wide and diverse range of indicators including data on jobs, consumer spending and debt, business openings and closings, population growth, economic forecasts, and more to assess and synthesize economic activity, business conditions, and social well-being in a way that is meaningful to Albertans and Alberta businesses.