Transcript Slide 1

Edmonton’s Economic Outlook
January 12, 2010
John Rose
Chief Economist
Strategic Management
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Agenda
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Recent developments – a global turn around is underway
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The outlook
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–
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Global environment
Energy prices
Canada , Alberta and Edmonton
Interest and Exchange Rates
Inflation
Employment
Housing Market
Alternative forecast scenarios
Sustainable long term growth or another bubble around the corner?
Discussion
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Global Environment
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An increasingly
uneven recovery is
underway
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Limited risk of a
‘double dip’
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After a strong first half
momentum is slowing in
North America
US and Europe may
reduce stimulus too
quickly
Global financial
markets remain
fragile
–
–
Greek, Irish and other
sovereign debt issues
US mortgage default
rates remain high
% Real Growth for 2010
China
Emerging
World
Canada
US
Euro Area
0
3
6
May-10
9
12
Oct-10
Source: International Monetary Fund
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Natural Gas Prices
Henry Hub
14.00
12.00
$US/mmBtu
10.00
5 Year Max
5 Year Min
2010
2009
2011 F
8.00
6.00
4.00
2.00
0.00
Jan
Feb
Mar
Apr
May
Jun
July
Aug Sept Oct
Nov
Dec
Source: US Energy Information Agency
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Oil Prices
West Texas Intermediate
140.00
120.00
100.00
80.00
$US Bbl
5 Year Max
5 Year Min
2010
2009
2011 F
60.00
40.00
20.00
0.00
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sept
Oct
Nov
Dec
Source: US Energy Administration
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Canada, Alberta & Edmonton
da
an
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C
lb
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ta
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A
A
C
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to
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of
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Ed
m
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Growth for 2010
ity
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Slowing after a red
hot first half
Canadian
conditions are
very solid
Alberta lagging
national recovery
A solid year for
Edmonton
C
•
0
1
2
3
4
% Real Growth
Source: IMF, Economic Trends and External
Research, Conference Board of Canada
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Parity + with the US Dollar
1.1
1
CDN Dollar per
0.9
0.8
0.7
0.6
0.5
US Dollar
10
O
ct
01
l2
20
0
0
Ju
pr
2
A
20
n
Ja
Euro
01
10
09
20
O
ct
00
9
9
Ju
l2
pr
2
A
20
n
Ja
00
09
08
20
O
ct
00
l2
Ju
A
pr
2
00
8
8
0.4
100 Yen
Source: Bank of Canada
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Interest Rates – No Where But Up
Source: Bank of Canada
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Current Trends in Edmonton
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Inflation as measured by CPI remains
moderate but Non-Residential
construction costs are on the rise.
Unemployment has been trending
down – currently running at 5.8%.
Good economic prospects stimulating
net in migration.
Housing market is settling into a
balanced situation.
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Consumer Inflation is Moderate
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Edmonton’s inflation rate
is below the national and
tracking closely the
provincial values.
Marked change from
recent history when
Edmonton was a high
inflation environment.
Costs associated with
non-residential
construction costs have
begun to move up raising
concerns for medium
term.
Edmonton CMA CPI
125
120
115
110
105
100
2005 2006 2007 2008 2009 Nov
Source: Statistics Canada
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Unemployment is Trending Down
9
8
7
6
5
%
4
3
2
1
ct
O
A
ug
Ju
n
A
pr
Fe
b
0
D
ec
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Edmonton CMA Unemployment Rate
ct
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Jobs lost in 2008 &
2009 have now been
largely recovered
Edmonton generating
jobs at twice the rate
of Alberta.
Labour force has
been growing which
kept the
unemployment rate
above the provincial
value
O
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Source: Statistics Canada
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A return to boom conditions?
Fig 1.13: Alberta real investment
Billions of 2002 Cdn$
80.0
60.0
Oil sands
40.0
Natural gas &
conventional oil
Residential
Public
20.0
Coal and metal mining*
Other
0.0
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Source: Energy Resources Conservation Board
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Three Forecast Scenarios
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Baseline (55%)
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High (15%)
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Moderate sustainable recovery in energy related
investments spread out over the forecast period
Relatively quick recovery in energy related
investments bunching up from 2011 to 2016
Low (30%)
–
Slower US recovery, depressed energy prices and
very slow recovery in energy related investments
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Real Growth in GDP for Edmonton
CMA
5
4.5
4
3.5
3
Baseline
High
2.5
2
1.5
1
0.5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Economic Trends and External Research
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The City and the Region
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The CMA will enjoy a quicker recovery
has manufacturing activity picks up
from very depressed levels
Over the medium term the City growth
rate converges with that of the region.
A somewhat younger demographic
profile allows the City to grow slightly
more rapidly then the region in the
final years of the outlook.
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Real Growth in GDP for Edmonton
CMA
4.5
3.5
3
2.5
2
Edmonton CMA
City of Edmonton
1.5
1
0.5
0
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
% Real Growth
4
Source: Economic Trends and External Research
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Summary
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Low interest rates will not last – potentially
sharp increases in the second half. Longer
term rates move up to more traditional
levels.
Relatively low inflation – Edmonton should
closely track the national rate of under 2%
and then accelerate to 3% range.
Modest but solid and sustainable recovery
from 2008/2009 over the forecast horizon.
Some downside risk due to sluggish US
recovery depressing energy prices.
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Discussion
John Rose
Chief Economist
Economic Trends and External Research
Strategic Management
Deputy City Manager's Office
12th Floor, Scotia Centre
Edmonton, Alberta, T5J 3R8
(780) 442-7086
[email protected]
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