Economy in good shape: speaker
Todd Hirsch served up a slice of onion at a Red Deer Chamber of Commerce luncheon Wednesday.
In a presentation titled Alberta Economy 2014: Peeling Back the Layers, ATB Financial’s senior economist offered his prediction of what’s lies ahead for the global, Canadian and Alberta economies in 2014.
“Talking about Alberta’s economy, I think there will be very few tears to be shed because I think we are in pretty good shape,” said Hirsch, continuing his onion metaphor.
Although natural gas prices are likely to remain low next year, and crude oil from the province will continue to trade below world prices due to pipeline constraints, real GDP growth in Alberta could hit 3.5 per cent in 2014, said Hirsch. That compares with a projected 2.8 to three per cent this year.
He thinks manufacturing will strengthen in 2014. The industry has been flat the past two years, which Hirsch thinks reflects a reluctance on the part of oil and gas companies to invest in new equipment until their access to export markets improves.
“I think in 2014 we will see a bit more certainty on pipeline projects,” he said. “So I think manufacturing will be another leading sector in Alberta next year.”
Looking at the outermost layer of the economic onion, Hirsch noted that anxiety over the well-being of the world has diminished.
“I think overall in Europe there is less concern these days that we are going to see a fracturing of the European Union or a collapse of their financial systems.
“They are very, very gradually improving. I think 2014 will see their economy pick up just a small amount, but it’s moving in the right direction.”
China’s economy appears headed for a soft landing instead of a crash in 2014, added Hirsch. And consumer confidence in the United States is rebounding, helped by a recovering housing sector and improving labour market.
“The U.S. unemployment rate is still above seven per cent, which is too high — you’d really like to see it at about five per cent — but it’s come down from the highs of about 10 per cent.”
The debt ceiling crisis hurt consumer confidence in the fall, largely because of the political drama surrounding it, said Hirsch. He’s optimistic the matter will be better-handled as the February debt ceiling deadline approaches.
In Canada, the declining loonie should help exports, he suggested. Interest rates are expected to remain stable through 2014 and beyond.
“We might be well into 2015 before the Bank of Canada feels like it merits an increase in interest rates.
“In fact, the next movement in interest rates could actually be a cut in interest rates.”
Hirsch noted that Alberta is on track this year to match and possible surpass the record number of people who migrated here from other provinces in 2006. But he also cited a Statistics Canada report that calculated there were 106,000 out-of-province residents working in Alberta between 2005 and 2009, of which only a quarter remained.
This is a concern, said Hirsch, and highlights the importance of quality-of-life sectors like culture, arts, recreation and sport.