The Alberta wildfires that scorched the Canadian economy in May, has caused the chief economist for the City of Edmonton to revise his economic forecast downward. The wildfires set the tone for this country’s single worst one-month performance according to Statistics Canada. On Friday it reported a contraction in real gross domestic product of 0.6 percent.
“Initially my feeling was that we would have negative numbers for Canada and for Alberta in particular but that Edmonton probably wouldn’t have been terribly affected,” said John Rose in an interview. “However looking at that slowdown in refining activity means that I’m going to have to go back and take a good look at GDP growth prospects for Edmonton.”
“I had growth around 0.6 percent, under one percent for the Edmonton region for 2016. I’m probably going to have to shave maybe a tenth, maybe two tenths off so we’ll be down to very close to zero growth as a result.”
Any business that was heading to the refineries in metro Edmonton will still happen, Rose said. It’ll just be delayed.
“That growth will come back later towards the end of 2016 and particularly in 2017 so in the end probably what’s going to happen is I’ll revise 2016 down, but 2017 for the city will go up and that will mean growth well in excess of two percent for the City of Edmonton in 2017.”
The slowdown at the refineries will impact employment, and as a trickle down effect, other economic activity in Metro Edmonton.
“You’ll have people who maybe won’t get laid off but you’ll see over time, hours come way down, people will be working minimum hours, and that will affect wages and salaries and that will in turn feed through to the consumer side of the economy in terms of consumption expenditures, retail sales, all of those things,” said Rose.
“It’s going to be pushed back well towards the end of 2016. When we get into 2017 we actually might see an uptick related to the activity in terms of the recovery and rebuilding. So our logistics sector will pick up because will be moving equipment and materials up to Fort McMurray. Our construction sector will probably pick up a little bit and you’ll see recovery in terms of engineering services and other professional services as well.”
The fires destroyed more than 2,000 structures in Fort McMurray which will be rebuilt.
Statistics Canada said there was a 22-percent drop in oil extraction. That was the lowest level of output since May 2011 the report said.
Over all Rose said April through June was very slow in Edmonton. “Unfortunately we’ve seen some very soft employment numbers as well but that’s no surprise so what I’m looking for as we get into the third and fourth quarter of this year is employment will firm up a little bit and we’ll see a little better performance in the economy. But Q-2 from April through to June was a very difficult month not just for Alberta but for Edmonton as well.”