Local economy predicted to slump

Red Deer’s economy will shrink this year because of slumping oil prices, predicts the Conference Board of Canada. However, city and Red Deer Chamber of Commerce representatives are more bullish on the local economy.

Red Deer’s economy will shrink this year because of slumping oil prices, predicts the Conference Board of Canada.

However, city and Red Deer Chamber of Commerce representatives are more bullish on the local economy.

Mayor Tara Veer said in a statement on Tuesday it’s not surprising that the oil and gas industry’s challenges are having a local impact. However, she finds much room for optimism.

“A strong year ahead, including new regional schools being built, public infrastructure being planned and events with strong economic spinoff coming to our community, will no doubt give our economy a healthy boost.”

The conference board released its Mid Sized Cities Outlook 2015 on Tuesday and it predicts this city’s economy will contract by 1.2 per cent, cutting employment by 3.6 per cent and raising unemployment to 6.7 per cent. In Medicine Hat, growth is expected to edge by a slim 0.4 per cent. Lethbridge will do a little better at 1.1 per cent growth.

“The dramatic drop in oil prices has hit Alberta hard, and Red Deer and Medicine Hat are no exception,” says Alan Arcand, associate director for the conference board’s Centre for Municipal Studies.

“However, economic growth should pick up next year as oil prices begin to recover.”

Medicine Hat and Lethbridge will fare a little better than Red Deer this year, largely buoyed by strength in their agriculture sectors, says the report.

Construction is expected to be among the hardest hit segments of the Red Deer economy, with a 13 per cent drop predicted this year, followed by a 3.2 per cent contraction next year.

Manufacturing will see only a razor-thin 0.1 boost this year, say conference board number crunchers.

In 2016, Red Deer is forecast for 1.5 per cent growth and 0.6 per cent job growth.

Red Deer Chamber of Commerce executive director Tim Creedon said he can’t speak to the specific numbers in the conference board report, but the evidence is clear that the oil and gas industry — and the many local service companies that serve it — are feeling the pinch.

“I wouldn’t argue with what I read in that report about our natural resource sector. It’s facing some challenges at the moment.

“We have a very strong service sector in the natural resource part of the economy. So when oil prices are where they are, we can expect some degree of correction.”

Among the signs all is not well is the increased number — and the frequency of oil and gas backgrounds — of applicants for open jobs.

“There’s no question there’s some contraction going on there.”

Creedon is less convinced by the construction forecasts.

Local home builders have had a good spring, are expecting it to continue through the summer before slowing in the fall and winter.

Some sectors in commercial — hotels and strip malls — are still very busy.

“It’s a very mixed picture depending on what type of market you’re in.”

City of Red Deer Land and Economic Development Department manager John Sennema is also a little surprised by the conference board’s predictions of a reversing economy and hard-hit construction industry.

“Everything anecdotally I’m hearing isn’t saying that to me,” he said. “That’s why I’m a bit surprised.

“Certainly we anticipated a little bit of a slowdown (and) we’ve seen that.”

Sennema said local firms are painting the current climate in terms of an “adjustment” rather than a full-on contraction.

Commercial building permits are up, construction is going full speed in Clearview and in Timberlands. While home building and industrial development in the Queens Business Park have slowed a little, there is still plenty of activity.

“You know what — it’s a forecast,” he said of the conference board numbers. “I’ll be surprised if it is that dramatic.”

While Alberta has been hardest hit by the oil prices tumble, the rest of Canada is feeling the pinch as well.

The country’s real gross domestic product declined for the fourth consecutive month in April, dropping by 0.1 per cent, said Statistics Canada in numbers released on Tuesday.

Goods production fell by 0.8 per cent, a symptom of contraction in mining, quarrying and oil and gas extraction.

“The oil shock continues to reverberate through the Canadian economy, in all its various forms,” says Doug Porter, chief economist with BMO Capital Markets.

Also declining were retail trade, and the finance and insurance sectors.

Showing better fortunes were the public sector, accommodation, food services and professional services sectors.

The conference board report provides economic forecasts for seven cities that contributed financially to the research: Lethbridge, Red Deer, Medicine, Brandon, Timmins, Ont., Sault Ste. Marie, Ont., and Rimouski, Que. Historical and employment data is included from 32 other mid-sized cities.

pcowley@bprda.wpengine.com

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