BMO Financial Group

BMO Financial Group

October 16, 2014 09:17 ET

BMO Economics: Alberta Remains Standout Leader Among Provinces, but Growth Gap Narrowing

- Real GDP growth of 3.5 per cent expected in 2014, 2.9 per cent in 2015 (Canadian real GDP growth of 2.3 per cent expected in 2014, 2.4 per cent in 2015)

- Energy sector remains key driver, and key risk

- Population growth similar to rates seen at height of pre-recession boom

CALGARY, ALBERTA--(Marketwired - Oct. 16, 2014) - Alberta's economy remains the standout leader among Canada's provinces, thanks to strength in the energy sector, a surging population and strong labour market, according to the Provincial Monitor report released today by BMO Economics.

"While activity appears to be cooling slightly alongside the downdraft in oil prices, real GDP is expected to grow 3.5 per cent this year, a hefty 1.2 percentage points above the national average and the only province sporting a 3-handle," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Growth is expected to moderate again in 2015 to 2.9 per cent - still leading the country."

The energy sector remains the key driver of Alberta's economy, and its strength continues to spill over into a wide range of industries. "Oil production was up a strong 15 per cent year over year through July, led by crude bitumen, and the industry is on track to produce more than 3 million barrels per day by 2017," noted Mr. Kavcic. "However, the boom-bust nature of oil leaves the door open to risks. The recent slide in oil prices, combined with ongoing cost pressures, has prompted some producers to dial back some projects. But it would probably take sustained sub-$80 oil to slow activity significantly."

Employment growth is running at a firm 2.4 per cent year-over-year clip in September, versus less than 1 per cent for all of Canada. "The province's healthy labour market continues to draw a significant number of migrants from other parts of the country," stated Mr. Kavcic. "The population surged nearly 3 per cent year over year in the third quarter, similar to rates seen at the height of the pre-recession boom. Not only are job prospects better compared to the rest of the country, but wage differentials also continue to widen."

As a result of these favourable economic and demographic fundamentals, Alberta's housing market has abruptly tightened. Benchmark prices in Calgary are up a strong 10 per cent year over year, and recently topped levels seen in 2007. With strong population inflows and supply mostly absorbed, rents are also on the rise again.

"Alberta continues to lead the country, thanks to the energy sector, a growing population and a strong labour market," said Susan Brown, Senior Vice President, Alberta & NWT Division, BMO Bank of Montreal. "Although oil and gas companies appear to be cooling due in part to the fall in oil prices, business owners in Alberta remain optimistic and are still expecting moderate growth in the coming years."

Ms. Brown also noted that, according to the semi-annual BMO Small Business Confidence Index - conducted ahead of Small Business Month - nearly two-thirds (61 per cent) of Albertan business owners expect the economy will be better for the rest of the year.

The full Provincial Monitor can be downloaded at

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had more than $586 billion in total assets and approximately 47,000 employees at July 31, 2014.

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