Moderate economic growth expected for Calgary in 2018

OTTAWA — Economic growth is set to be moderate in Calgary this year with an anticipated expansion of 2.5 per cent, according to The Conference Board of Canada’s Metropolitan Outlook: Winter 2018.

Higher oil prices fueled a big rebound in Calgary’s economy last year, as real GDP growth surged 6.9 per cent, although the city did not fully recoup the losses experienced after the oil price collapse in 2014. That recovery should be accomplished this year however, as Calgary’s economy is expected to expand by a further 2.5 per cent, stated the Conference Board.

Recovery in the energy sector helped output in Calgary’s primary and utilities industry expand to a record 13.5 per cent last year — the sector’s first double-digit gain. This year, output is forecast to expand by a more sustainable 2.6 per cent. The energy sector turnaround has also breathed new life into Calgary’s domestic economy. For example, the construction sector is forecast to expand by close to 2 per cent in both 2018 and 2019. Although sky-high vacancy rates will keep the downtown office market subdued, major projects such as the $3-billion StoneGate Landing business park and government infrastructure spending should provide a boost to the industry.

Meanwhile, residential construction continues to be challenged by high inventories of unsold new homes, rising interest rates, and an expanded federal mortgage stress test. Thus, housing starts are expected to rise only modestly this year.

Retail spending bounced back strongly last year too, as local consumers regained their confidence, but more modest gains are in the cards this year. We expect retail output growth to decelerate sharply from 8.9 per cent in 2017 to 2.4 per cent in 2018. Wholesale trade will experience a similar slowdown.

Rising employment helped cut the unemployment rate from a 22-year high of 9.4 per cent in 2016 to 8.7 per cent last year. With employment forecast to rise 2.0 per cent this year, the unemployment rate should edge down further to 8.2 per cent — still high by Calgary’s standards.