Edmonton’s Economic Outlook

Agenda The Context Long-Term Outlook International Context Energy Prices Regional & Local Current Indicators Long-Term Outlook Edmonton & the Region Risks to the Outlook

Global Context An uneven and anemic recovery - slower then that from the Depression Forecast growth rates in most regions have been lowered Euro zone countries finally showing sustained growth Global financial markets remain fragile – large capital outflows from emerging markets While 2016 should be a better year, slowing growth in China is problematic due to its increasing share of global output Greek economy is now 30% smaller then it was in 2008. The Italian economy is 8% smaller. Spain is 4% smaller. Portugal 5% smaller. Ireland also about 5%. By way of comparison the Canadian economy is 6% bigger. We made up all the losses in the recession in less then one year. Source: International Monetary Fund

Oil Prices West Texas Intermediate Source: US Energy Information Administration 4

Oil Prices Improve $US/BBL Source: Bloomberg

Natural Gas Prices Henry Hub Source: US Energy Information Administration 6

Unemployment Accelerates Process leading to higher unemployment very different between Calgary with job losses and Edmonton with labour force growth The Edmonton region’s rate of job growth is positive year over year at 3.9%. A recent shift to part–time job gains may undercut consumer spending over the next 12 to 18 months Unemployment in the Edmonton region will approach the 7.5% range by mid 2016 Source: Statistics Canada

Employment Growth by Region May 2015 to May 2016 3 Month Moving Average Source: Statistics Canada

Change in Employment May 2015 to May 2016 Three month moving average Job Gains Job Losses Alberta (-32,500) Retail 20,200 Manufacturing -26,400 Prof. Services 10,900 Agriculture -16,400 Education 9,700 Hospitality -15,900 Info., Culture, Rec 5,900 Logistics -13,500 Edmonton CMA (+29,500) 17,100 -12,300 Other Services 9,400 -5,300 6,200 Primary -4,600 Public Admin. 6,400 Source: Statistics Canada

Employment Growth by Metro May 2015 to May 2016 Source: Statistics Canada

Edmonton CMA’s Population Growth 2015 Total 30,534 Source: Statistics Canada

Consumer Inflation Normalizing Year-over-Year Change in CPI The region’s year-over-year inflation rate slowed sharply in the first quarter of 2015 Housing, clothing and food prices continue to move up Inflation will hold at current levels. Forecast is for a move toward 2.0% in 2016 Lower inflation will boost real incomes for Edmonton residents as wages continue to rise. Source: Statistics Canada

City of Edmonton Housing Starts Source: CMHC

Edmonton CMA Building Permits Source: Statistics Canada

Edmonton CMA Median House Price Year to Date: May Source: Edmonton Real Estate Board

Edmonton CMA Home Sales Year to Date: May Source: Edmonton Real Estate Board

Canada, Alberta & Edmonton Edmonton will outperform Alberta due to its relatively diverse economy 2015 brought dramatically slower growth for the City and negative growth for Alberta and the Edmonton CMA A recession scenario for Edmonton requires low oil prices to persist and a pull back in provincial expenditures Source: IMF, City of Edmonton, C4SE

Growth Moderates in the Longer Term Real GDP Growth The City experienced a sharp slow down during 2015. City and region makes a gradual recovery to faster growth in 2016 while the province lags. Continuing in migration allows the City and the region to grow more rapidly than Alberta and Canada in the final years of the outlook. Source: City of Edmonton, C4SE 18

Risks to the Edmonton Outlook Downside Consumer confidence in Edmonton falters as incomes level off and concerns grow over job security Low oil prices persist into 2017 and 2018 causing severe slump in energy investment and government spending Brexit induced slowdown in Europe depresses commodity prices Stricter controls on carbon emissions and opposition to energy investments constrain longer term growth Upside U.S. recovery gains additional momentum US oil production and inventories are falling helping to firming up North American energy prices Canadian business investment and exports show more strength and boost growth Emerging market countries succeed in stimulating more rapid growth

Subscribe for monthly updates on edmonton.ca/EconomicNews Edmonton’s economy edmonton.ca/EconomicNews Upcoming events ESNA.CA

John Rose Chief Economist Financial Services and Utilities 780-496-6070 john.rose@edmonton.ca