THE LEADERS - WESTERN CANADA

Fighting the Fiction that

Prospects are Nothing but

Rosy in Western Canada

BY ALEX CARRICK, CHIEF ECONOMIST, CONSTRUCTCONNECT

Since population growth these days is being largely driven by immigration, it seems that Manitoba is finally

being ‘found’ by foreigners. At +1.6%, the province has experienced Canada’s fastest year-over-year increase in residents in the country.

 

A positive pay-off has been the +61.0% year-to-date climb in housing starts. Winnipeg’s residential groundbreakings are +50.0%.

 

Winnipeg is also one of four Canadian cities cited by commercial real estate analysts when they speak about office building markets around the world that are especially buoyant. The other three metros in Canada falling into this upbeat category are Toronto, Vancouver and Ottawa.

 

The numero uno signal of ‘buoyancy’ in office markets is a vacancy rate that is falling. (Calgary and Edmonton have lost a lot of ground on this score.)

 

Manitoba’s unemployment rate of 5.0% is lowest in the land. Its year-over-year climb in employment, at +2.1%, is exactly keeping pace with total Canada.

 

The Prairie provinces of Manitoba and Saskatchewan are paying close attention to how Enbridge Energy is faring in a bid to win U.S. approval for its $8 billion Line 3 project. This oil pipeline replacement work will nearly double capacity from 390,000 barrels per day to 760,000.

 

Crude will be pumped from Hardisty, Alberta, all the way across Saskatchewan (staying south of Regina), then through

southwest Manitoba, before it crosses the border into America.

 

Once in the U.S., it will touch on upper eastern North Dakota and move through Minnesota to Wisconsin. Regulators in

Minnesota are examining the impacts of potential oil spills on native American resources.

 

Saskatchewan’s well-respected Premier, Brad Wall, has announced his retirement.  He’s been a feisty fixture on the Canadian political scene for a decade. The past couple of years can’t have been fun for him. The province has struggled due to depressed commodity prices.

 

Potash companies, which were once the darlings of the investor set on the TSX, have thudded back to earth. Their rarefied valuations have crumbled. The hope now is that a newly-merged Potash Corp and Agrium will be able to seize more market control.

 

Saskatchewan is, however, enjoying an improvement in its export sales year to date. Receipts from shipments of energy products have soared +56.3%. While not showing improvement to the same stunning degree, ‘metals and minerals’ exports are +13.4% and ‘farm products’, +4.2%.

 

Despite impediments imposed by its provincial government — i.e., in the form of higher taxes, penalties for carbon emissions and a scheduled minimum wage hike — the Alberta economy has been clawing its way out of a deep hole. The improvement in oil price, from a low near $30 USD per barrel, to between $45 and $50, has

been a big help.

 

There’s no escaping the conclusion, however, that Alberta’s dominant oil patch needs greater access to markets beyond Canada’s borders. The Trump Administration’s go-ahead for the Keystone XL pipeline expansion is highly encouraging, but there are still hurdles to be overcome with state authorities.

 

And owners with pipeline proposals to ship oil to Asia and Europe, must first stick handle their way through the opposition of some other provincial governments (Energy East has just been nixed).

 

Alberta’s population of 4.3 million comprises 12% of Canada’s total. The province’s share of total ‘architectural,

engineering and related services’ jobs in Canada — i.e., 41,500 out of a total 196,000 — has been a considerably

higher 21%. A remarkable history of energy-related mega project construction in the Oil Sands has accounted for the

large community of workers in the design professions.

 

Alberta’s proportion (21%) of architectural and engineering services job in Canada is second only to Ontario’s (35%),

although its lead over Quebec (20%) is slight. It should also be noted that during the most recent 12 months, the number of design services jobs in Alberta has contracted by nearly 2,000 in nominal terms, or by -4.5%. Alberta is finally emerging into the light, but a string of legacy negatives is having unfortunate consequences. To combat the dire situation in hydrocarbon markets, Edmonton ramped up deficit spending. The marked increase in the debt load has caused S&P to lower the province’s credit rating by two rungs, from AAto A-.

 

 

There has been quite a turnaround in Alberta housing starts this year. Year-to-date and province-wide, they are +28%. In Calgary, they are +35% and in Edmonton, +22%.

 

In the past year, B.C. has led all provinces in year-over-year jobs creation (+3.6% versus Canada’s +2.1%), and it has

recorded strong earnings growth, both hourly (+3.5% versus Canada’s +3.1%) and weekly (+2.5% versus Canada’s +2.0%).

 

It has also rung up a remarkable and country-leading improvement in retail sales, +9.9% year over year.

 

B.C.’s real GDP growth rate in 2016 was +3.7% and it is still expected to beat all others in 2017, but at a slower +3.0% pace of output advance.

 

Nevertheless, the fact that there are spreading pockets of fiction in the assertion that B.C.’s prospects are nothing but

rosy is becoming more apparent. Too many speed bumps have been laid along the expressway.

 

Pro-business Christy Clark has recently been unseated as Premier by the NDP’s John Horgan. The new minority government is dependent on support from the Green Party.

 

The decision by Petronas not to proceed with a super-expensive LNG facility has shattered Ms. Clark’s earlier dream of establishing a from-the-ground-up major new industry in the northwest of the province.

 

With respect to more conventional energy developments, the NDP campaigned on a pledge to do all in its power

to stop expansion of Kinder Morgan’s TransMountain oil pipeline. It is seeking ‘intervener’ status as environment-related courtroom hearings proceed in B.C. The project has already been green-lighted by the federal cabinet.

 

Another ‘pending’ situation that is fraught with meaning for B.C.’s construction industry concerns the Site C hydroelectric power station and dam on the Peace River. There are forces working to derail this multi-billion-dollar investment before it proceeds any further.

 

Naysayers argue that there is no assurance the huge additional power capacity will be needed — especially if refrigerating liquefaction plants don’t proceed. Also, conservation efforts in general are having a dramatic effect with respect to electricity demand.

 

But much of the U.S. West Coast, which has become susceptible to drought, will remain an eager customer. Plus, there are the heightened demands on power that will arise as the transition from gas to electric vehicles intensifies.

 

There is also the softwood lumberdispute to be resolved with a U.S. forestry sector that is ready to litigate with minimal provocation. U.S. logging and sawmill firms can supply only about 70% of U.S. housing demand. Nevertheless, duties in a range of 20% to 25% have been imposed on Canadian imports, driving up costs for U.S. new home buyers.

 

B.C. housing starts are currently -4% year to date, with Vancouver at -13%.

 

Reminiscent of the way in which Toronto-area homebuying demand has moved as far afield as Hamilton in Ontario, a similar situation has emerged in Victoria relative to Vancouver.

 

While average resale home prices in Vancouver are currently +2.7% year over year, according the Canadian Real Estate

Association (CREA), in Victoria they are +14.8%.

 

In the high-tech realm, B.C.’s share of total ‘computer systems and design services’ jobs in Canada is 12%, nearly

matching the province’s slice of the nationwide population pie, at 13%. Over the past year, such employment in the region has risen by 2,200 jobs, or +8.5%.

 

One field in which B.C. really does grab the spotlight, though, is in ‘motion picture and sound recording’ jobs. Its share of the national total is currently 18%. Only Ontario, with a surprisingly expansive 48%, and Quebec, 26%, are doing better.

 

It should be broadcast, however, that whereas Canada, Ontario and Quebec have had year-over-year increases of

+6.8%, +6.6% and +1.5% in entertainment jobs, B.C. has managed a bouquet-ofroses-worthy +14.8%.

 

HOME

ARTICLES

LEADERS LIST

Daily Commercial News and

Construction Record

3760 14th Avenue, 6th Floor

Markham, Ontario  L3R 3T7

Phone: (905) 752-5408

Fax: (905) 752-5450

www.dailycommercialnews.com

 

Journal of Commerce

101-4299 Canada Way

Burnaby, British Columbia

V5G 1H3

Phone: (604) 433-8164

Fax: (604) 433-9549

www.journalofcommerce.com