Are we in the midst of an economic chill?

Commentary by Kevin Laliberte

Are the wheels turning Alberta’s red hot economy about to go flat? Well, brace yourself Alberta, because it appears as though we finally may be in store for a symptomatic case of the economic sniffles (cough, cough, sputter), despite stories about spiraling inflation, labour shortages and supply shortfalls. The recent shift comes as a shock to a steadfast business sector which has firmly maintained the belief that the trend for growth would continue pointing in an upward direction. Ah, but you know what they say … what goes up most certainly must come down! Yeah, I realize that much like our oil, this is a crude statement. Still, that’s the reality of living in a province billed as Canada’s economic powerhouse and home to thousands of new refugees – survivors of sporadic economic train wrecks across the country. The projected economic chill comes as less of a surprise to consumers, who have sensed – perhaps even prayed for – a cooling off period for months now. A survey conducted for accountants Pricewaterhouse-Coopers LLP by Leger Marketing in November 2007 found both consumers and small business owners were feeling trepidation around future unemployment rates and current business conditions. Most notable in the November survey was a marked drop in confidence about employment. This followed speculation on cuts in investment from the oil and gas industry, as well as softening housing starts. Consumers were least confident about investing in a new house for example, with almost 60 per cent of the respondents indicating now is definitely not a good time to be a buyer. More evidence of this is visible through MLS sales for single-family homes and condos, which were down nearly one-third from the same time one year ago. As for housing construction starts, they’re expected to reach 29,000 by the end of 2009 (down from 48,336 in 2007 and 32,750 this year). That forecast comes from Canada Mortgage and Housing Corp. in its latest Housing Market Outlook. Much of this slowdown is directly attributed to growing fears about slowing oilsands development. This month, StatoilHydro ASA, Norway’s largest oil company, stated it might postpone the start of an upgrade plant at its Canadian oilsands project for a second time because of rising costs and lack of clarity regarding regulations. Through it all, economists are urging Albertans not to push the panic button. Not yet, anyway. The truth of the matter is this province has just experienced a decade of unprecedented growth, the kind that most prudent economists have warned all along was unsustainable and more of an improbability than a possibility. Some of these same economists suggest the current downturn is viewed as more of a correction than a crash, providing much-needed breathing space for a province choking on its own success. The bottom line is Albertans may have to get used to a little bit less from here on in. Now, this isn’t to suggest this case of the economic sniffles will morph into a full-blown cold – at least not while the oilsands continue to garner the attention of U.S. government and its investors. The shift in housing, retail and consumer confidence is just part of the natural cycle of things, similar to our seasonal climate patterns. In the long run, an economic cooling off period is seen as a bonus, especially if it leads to more sustainable economy, with less rampant inflation. Most Albertans would agree a little slowdown might just make this overheated province a little more livable. And that’s something most envious provinces in this country would still trade for in a Fort McMurray minute if the opportunity presented itself.

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