Why did God invent Economic Forecasters?  To make Weather Forecasters look good.  Opening his Economic Update with this joke, Frank Atkins, Associate Professor of Economics at the University of Calgary, set the tone for an entertaining presentation to a sold out CPBI crowd last Thursday. 

The dramatic drop in oil prices and recent news of big oil companies slashing capital expenditures and trimming staff may have many of us thinking the sky is falling again, but Frank says we shouldn’t be too concerned.  He said “contrary to the Conference Board predication, the probability an Alberta recession is low.”  His prognosis for the Alberta economy is that we’ll see a slowdown in 2015 but a “return to strong growth in 2016.”  Alberta’s growth rate will lag the rest of Canada in 2015 at 2.1%, but will again lead the country in 2016 with a predicted rate of 3.2%.

Even with recent announcements of employee layoffs, Frank’s charts actually showed a 3.3% increase in employment in Alberta in 2015.  However, the unemployment rate may still rise if there is an increase in the number of employees looking for work.  Alberta’s unemployment rate is still much lower than the rest of Canada and net provincial migration to Alberta will continue to be strong.  One potential problem to watch out for is that the provincial government could once again damage the economy by increasing taxes and spending.  However, Dr. Atkins believes Premier Prentice is a fiscal conservative who is less likely to let this happen.

Although the markets have not been as kind to Canada recently, national growth is expected to be 2.4% in 2015 and 2.3% in 2016.  Frank appears to be more optimistic about Canada’s longer term economic prospects as the federal government is expected to start running a fiscal surplus within the next year.

Other insightful predictions in Frank’s crystal ball are that oil prices have probably bottomed out and prices should return to a more normal levels in 2016. Although he qualified this statement by admitting “oil prices are very hard to predict” since the price of oil often defies other economic fundamentals.  While there is currently an excess supply of oil, 2015 is expected to be a banner year for auto sales and the drop in the price at the pumps already has consumers driving off the lots with larger SUV’s and trucks.  This will undoubtedly increase demand for oil, which should help put upward pressure on prices.

On interest rates - Frank indicated we should expect interest rate increases in 2015, which will start to rise by spring or early summer in the US followed by Canada.  He predicts the Bank of Canada will increase rates by 25 basis points every few months during the last half of the year returning interest rates to a more normal level in 2016.  Frank made no bones about the accuracy of economic forecasts including his own past predictions, so it will be interesting to watch how the year unfolds. 

So how will the rest of the world perform in 2015?  China will continue to lead the world with 7% growth in 2015, which is marginally lower than recent years.  Although forecasters love to predict considerably slower growth for China, Frank says this typically hasn’t happened.  The U.S. economy will continue to be strong at 2.9% in 2015, up from 2014, in spite of unrestrained debt levels and government spending.  The Eurozone will continue to struggle through 2015 with growth below 1% and alarming debt levels.

My 2015 economic forecast for Calgary is that there will still be a shortage of multi-million dollar homes and a surplus of luxury vehicles jockeying for the last parking spot at the shopping mall on any given Saturday.  And, even though several Calgary based employers have already announced layoffs, skilled and experienced workers will continue to be in high demand.

- Kenneth MacDonald 

Pre-Session Survey Results 

Thanks to all of you who participated in our inaugural pre-session survey.  The results are in and the highlights are as follows: 

• The drop in oil prices has definitely created some pessimism related to growth and employment.
• Our respondents appear to be split on the direction the stock market will head in 2015 but believe oil prices have bottomed out and will rebound or hold steady.
• Surprisingly there doesn’t appear to be plans for significant downsizing in 2015 and no major pension and benefit program changes are anticipated.

Please visit our WordPress Blog for a copy of the session presentation and survey results