The straight talk on reading beyond the headline and the Alberta economy

By guest blogger, Myke Thomas of the Calgary Sun

Former U.S. president Bill Clinton certainly had some character flaws, but he was a masterful politician, with the ability to look at issues and accurately judge them.
One of his mantras when speaking about the U.S. economy was, “Follow the trend lines, not the headlines” and it’s good advice when trying to make sense of the Alberta economy right now.
On my desk are six reports from different sources, all but one released in February, with each offering an opinion of where the provincial and Calgary housing markets are headed.

The reports are from TD Economics, the Canadian Home Builders’ Association-Alberta, Canada Mortgage and Housing Corp. (CMHC), RBC Economics, CIBC and the Calgary Real Estate Board (CREB) with each one correctly predicting or reporting housing markets are cooling off.

It’s the one thing they all agree on, but they don’t all agree on the degree of cooling.

The home builders’ association and CMHC are reasonably close when predicting new home starts in Alberta this year, with the former saying 34,300 and the latter saying 36,000, but the story behind those numbers is, there were records broken in new home starts in 2014, so starts were going to decrease this year even without the decrease in oil price. CMHC actually offers a range of starts in the province this year, with 36,000 being the high and 23,000 the low. RBC Economics expects starts to decline to 27,500 this year, which would still be higher than starts in 2009, 2010 and 2011. TD Economics is predicting 33,500 new home starts this year in Alberta and 49,800 existing home sales, down from 71,800 last year, a 32% decline. RBC expects MLS sales to drop 16% in the province this year, while CMHC is predicting MLS sales of 71,100.

CIBC says we should expect a recession in Alberta, but it will be short-lived and mild. Meanwhile, the latest report from the Canadian Real Estate Association (CREA) says MLS sales in Calgary in January slipped 36% (actual, not seasonally adjusted) from January last year but the average price declined by only 1.4%. CREB reported the average MLS sales price in Calgary in January was down .51% year over year.

We’ve all read about job losses in the energy sector and certainly we wish those people well, but ATB Financial reports Alberta added 13,700 new jobs in January. And there is this from the RBC report, “Nonetheless, not all is bleak in Alberta. A population growth rate of 1.5% would still be stronger than the Canadian average. After a likely flurry of layoffs in the first half of the year, we would expect that businesses will start hiring again later this year. Such factors would support further growth in consumer spending in the province, albeit at a much more subdued pace than seen in the past few years. “Assuming that governments refrain from slashing expenditures, we believe that there will be sufficient offsets to the negative developments to keep Alberta’s economy afloat this year and next.”

This is not to disparage any of the forecasts nor an attempt to blow smoke up your, ah, nose but to pass along Bill Clinton’s advice, “read past the headline.”
Don’t react prematurely, watch as the trends unfold and make your decisions based on that knowledge.