Hit hard by declining oil prices, Calgary's economy expected to shrink this year

OTTAWA, May 14, 2015 /CNW/ - The sharp drop in oil prices will have severe consequences for Calgary as its economy is expected to shrink by 1.2 per cent this year, its first decline since 2009, according to The Conference Board of Canada's Metropolitan Outlook: Spring 2015.

"The collapse in oil prices has significantly altered the economic outlook among Canada's largest cities. In fact, among the 13 cities covered in this edition of our report, Calgary will have the worst-performing metropolitan economy this year," said Alan Arcand, Associate Director, Centre for Municipal Studies. "The city's economic growth should resume next year as oil prices begin to recover, albeit at a modest pace of 1.5 per cent."

HIGHLIGHTS

• Hit hard by the slump in oil prices, Calgary's economy is expected to decline by 1.2 per cent in 2015.
• Calgary's economy will begin to rebound next year, but growth will be modest at 1.5 per cent.
• Aside from Calgary, Edmonton, Regina and Saskatoon, most of the 13 census metropolitan areas covered in the latest Metropolitan Outlook can expect improved economic growth this year.
• Toronto, Vancouver, and Halifax will be the fastest growing metropolitan economies in the country this year, with each posting gains of 3.1 per cent.

Driven by the sharp drop in oil prices, the city's resources, agriculture and utilities sector, which includes the oil extraction industry, is set to contract by 2.3 per cent. In addition, employment in the energy sector is expected to dip by 8.1 per cent this year.

Other sectors of the economy will also feel the pinch of lower oil prices. Housing starts are expected to fall sharply, dropping by over 30 per cent, as net migration slows and job growth weakens. This, combined with falling business investment, will lead to a big drop in construction activity. Wholesale and retail trade output is also forecast to shrink by 1.5 per cent this year, as consumers cut back on spending. Finally, the weak energy sector will pull down output in the transportation and warehousing sector by 3.1 per cent.

With the exception of Calgary, Edmonton, Regina, and Saskatoon, most of the 13 CMAs covered in the report will see their economic fortunes improve this year, boosted by lower oil prices, as well as a weaker Canadian dollar and improvement in the U.S. economy. Toronto, Vancouver, and Halifax will be the fastest growing metropolitan economies in the country this year, with each posting gains of 3.1 per cent.

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SOURCE Conference Board of Canada

Yvonne Squires, Media Relations, The Conference Board of Canada, Tel.: [phone] ext. 221, E-mail: [email protected]; or Juline Ranger, Associate Director of Communications, The Conference Board of Canada, Tel.: [phone] ext. 431, E-mail: [email protected]