The Spring 2023 Calgary and Region Economic Outlook is now available
Today, the Spring 2023 Calgary and Region Economic Outlook 2023-2028 was released on calgary.ca/economicoutlook.
Calgary should avoid a recession in 2023 and achieve the coveted soft landing. However, the prime lending rate is now at its highest in over two decades after the Bank of Canada’s efforts to tame rapid consumer inflation with multiple interest rate increases. Many households and businesses are unfamiliar with navigating the new higher interest rate environment. It will affect the conviction to deploy capital and investment levels, including residential home ownership investment decisions.
“The supply of workers should remain strong because of the record migration to Calgary between 2022 and 2023. However, the imbalance between the skills employers seek and those available in the job market would sustain wage increases into 2023. Strong (but unspectacular) energy prices, labour supply, wage growth and earnings should support strong consumer spending and a resilient economy,” said The City of Calgary’s Manager for Corporate Economics and Regulatory Affairs, Oyin Shyllon.
Key highlights include:
Calgary is expected to experience lower but positive local and regional economic growth in 2023, driven in large part by strong energy sector cashflows. While the rate of growth in Calgary is expected to slow, the economy should remain resilient as the positive factors contributing to growth outweigh the negative.
Housing, non-residential and business fixed investment levels are expected to decline after the 2022 surge as businesses exercise caution in the face of uncertainty. A key driver is higher financing costs for new investment projects after significant interest rate increases by the Bank of Canada to combat inflation. For 2023, Calgary is expected to record about 13,100 housing starts and the value of new investments in buildings that would start construction is forecasted at $5.7 billion.
Strong population and labour force growth will help address high job vacancies with economy-wide earnings, boosting consumption and offsetting a decline in investment. Consumption of goods and services by households will be a primary driver of Calgary’s economy as new residents increase demand for housing and services in the region.
Cost pressures are expected to persist and remain higher for businesses and governments in 2023. That’s because of divergence across four inflation categories – declining average house prices, decelerating consumer price inflation, positive wage inflation, and significant construction inflation. The inflation categories (wages and construction) that affect the costs of businesses and governments more directly are under pressure.
· After a 7.2 per cent increase in the cost of living in 2022, the average growth in Calgary’s consumer price inflation should decelerate to 3.8 per cent in 2023.
· Businesses are expected to experience significant upward pressure on labour costs as Alberta wage inflation reaches 3.5 per cent in 2023.
· The sustained increase in prices for non-residential building construction is anticipated to increase to 10.4 per cent in 2023, reflecting an increase in wages, higher energy and financing costs, and sustained high prices for some underlying construction commodities.
The City of Calgary monitors and forecasts key indicators for the local economy, and the results are published twice a year in the spring and the fall. These forecasts are used to assist the municipal government in financial and physical planning for Calgary.
The City’s Corporate Economics team are experts in their field and create reliable forecasts based on a wide range of indicators. They have developed reliable methods of forecasting and analysis that are specific to the Calgary region.