Wednesday, January 03, 2007

Alberta's Economy is "Moderating."

The Alberta marketplace looks like it is starting to adjust to the new realities of labour shortages “…once again the most limiting factor affecting business activity” according to the Alberta Treasury Branch’s “Business Sentiments Index.” Anticipation for the first Quarter of 2007 shows Alberta business still expects strong growth with an Index rating of 140.2 but not at the levels of the last Quarter of 2006 when the Index had a record 163.1 Index rating.

Construction prices are still expected to rise and that makes for some interesting challenges for the Stelmach government who are committed to closing the public infrastructure gap caused by years of neglect.

Hiring intentions are down slightly in all sectors except the Professional and Technical Services which remained steady between the end of 2006 and the beginning of 2007. Business activity in this sector is still expected to grow significanly next year so planning and design for new projects is continuing, building them is moderating.

Oil and Gas, Manufacturing and Construction anticipation for early 2007 is for a moderated business growth but still remaining relatively strong. We can see this reflected in a number of major project second phases that are being delayed. The new recently approved oil sands megaprojects like Suncor Voyageur and Shell Albion are still going full steam ahead and will be corralling the available skilled workforce.

Our research at Cambridge Strategies indicates that managing growth is one of the top public policy issues facing the Stelmach government. Smart governments are appropriately hesitant to interfere in the marketplace. Based on this ATB data, it looks like they will not need to intervene. The market itself is starting to moderate Alberta’s growth in the face of unrealistic project costs and the lack of skilled labour is doing it already.

Now will costs reduce too? Not anticipated in the ATB data, in fact the sentiment is they will continue to escalate but for how long...that is the $100 Billion Dollar (Plus)question. Maybe the Second Quarter ATB Business Sentiments Index will tell us more. I will let you know.