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Alberta's economy continues to outperform amid rising oil production and accelerating inward migration, according to the Provincial Monitor report released today by BMO Economics. The province will sit atop the Canadian leaderboard this year, with growth hitting 3.5 per cent before falling back slightly to 2.9 per cent in 2013.
"The energy sector remains the key driver of economic activity in the province, with crude bitumen production up 16 per cent year-over-year through the first half of the year, and the Energy Resources Conservation Board expecting oil sands output to more than double by 2021," said Robert Kavcic, Economist, BMO Capital Markets.
"Businesses in the private sector continue to be driving Alberta's economic growth by making important strategic investments and by focusing on opening up new markets," said Bill Hogg, District Vice President, Commercial, Alberta, BMO Bank of Montreal. "Our recent BMO Small Business Confidence Report shows that Albertan entrepreneurs have the most positive outlook in the country, with 70 per cent saying 2013 will be a better year and 55 per cent believing their business will experience growth in the year ahead."
Mr. Kavcic did note some potential risks to the oil sector. "Cost pressures could again pick up, though oil sands operations are generally viewed as economical at prices above $80. Also, wrangling over new pipeline capacity continues. In the meantime, more Bakken production-filling limited pipeline capacity-has contributed to a wider discount received by Canadian producers relative to WTI. Estimates suggest that production in Western Canada could be negatively impacted by 2015/16 if there is not enough new pipeline capacity put in place."
Strength in the energy sector has helped spur net in-migration, which hit the highest since the 2006 boom in the first quarter of 2012. Labour market trends, while favourable, have ebbed from an extremely robust performance last year. Private-sector job growth has levelled off, up 2.7 per cent year-over-year in September; most of the cooling has been in services, as growth in resources and construction is still strong.
"The 4.4 per cent jobless rate remains the lowest in Canada," said Mr. Kavcic. "Housing market activity is improving thanks to rising demand and a gradual drawdown of the excess supply put up during the 2005-07 boom. In Calgary, prices were up 6.8 per cent year-over-year in September, and have regained about half of the declines seen during the recession."
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at July 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.
Laurie Grant, Vancouver