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CITY: Calgary’s economy growing at "more sustainable, less inflationary" 3.3% to 3.8% rate
        (AlbertaIndex, August 18, Monday) --- There’s no doubt that Calgary’s economy is slowing down after several years of breakneck pace expansion. But the extent and character of the slowdown is nowhere near the extreme gloom the city experienced in the early 1980s or what the US is going through right now, says Calgary Economic Development (CED).
        In its half-time report on the state of the economy, the agency noted that conditions have played out to what it had earlier predicted.

It expects the city’s economy to grow by 3.3 to 3.8 per cent, a slowdown from 2007, due largely to labour shortages.

If there’s a silver lining, it says the slowdown is creating a “more sustainable” environment with “healthier and less inflationary conditions”.

Its report card noted: “The Calgary economy is slowing down nicely for the first half of 2008, from the frenetic pace of 2006, and the still hot level of 2007. The majority of indicators show that the pace of growth is in the more sustainable range and therefore creating healthier and less inflationary conditions.

“Inflation should be kept relatively in check. Continued higher energy prices should serve to push Calgary’s GDP growth for 2008 to the higher side of forecast.”

But it cautioned two areas of concern that could cause a greater slowdown: labour force growth and the residential housing market.

With the lowest unemployment rate in Canada for the past few years and job creation growth outstripping labour force growth, Calgary is essentially at the wall of employment growth.

The city’s labour participation rate is the highest in Canada, with very little room to grow without improvements in areas such as child care, elder care, changes to pension legislation and changes to immigration practices and processes. With restricted employment growth, economic growth will be constrained, said the CED.

A significant component of Calgary’s economic outlook rests on the ability to generate new workers, or to adjust practices to reduce the demand for workers, either through productivity gains, automation, technology or process improvement.

The report concluded: “Therefore, efforts need to continue on simultaneously increasing the supply of workers in Calgary, while working to reduce the demand for workers through the use of technology and improved productivity.”

The report said Calgary could face greater slowing pressure from its weakened residential real estate market. Over the last 24 months, it noted that the city has moved from a sellers’ market, where demand outstripped supply, to a buyers’ market.

In May 2008, 7,099 single-family homes and 3,308 condos were listed for sale on the MLS. Supply is currently far outstripping demand, creating downward pressure on prices.

The report said that with such a large inventory of properties on the market, there is the risk of individuals taking on multiple mortgages to carry properties until sale.

This can reduce disposable income and reduce consumer expenditure, reducing overall local economic growth. It remains to be seen how long this excess supply condition will continue and when we will achieve a greater balance or equilibrium in the housing market.

On a positive note, the report said Calgary does not appear to be at risk of a housing market collapse along the lines of the US. But it warned that a “prolonged disequilibrium”  could put a greater brake on the Calgary economy than otherwise expected.


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