Province's economic health masking affordability challenges for growing number of Albertans

‘If you look at the individual person and household, they’re actually not doing great,’ said Alicia Planincic, economist at the Business Council of Alberta

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The high cost of living is wearing down an increasing number of Albertans — even as the province’s economy chugs along with higher confidence than the rest of Canada, a new report says.

While there hasn’t been a sudden increase in inflation or economic shock, months of operating on a tighter budget may be having a cumulative effect on Albertans, said an economist at the Business Council of Alberta (BCA).

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“If you look at the individual person and household, they’re actually not doing great,” said Alicia Planincic.

A third of the way through 2024, 42 per cent of Albertans described their financial situation as “good,” according to recent polling from Janet Brown Opinion Research, the smallest number recorded since the data was first tracked in 2020. That’s down from 54 per cent just a handful of months ago.

“For a few months, maybe you can deal with it — you can move things around,” Planincic said. “I think what we’re seeing is just enough households are pushed to the edge where, all of a sudden, they can’t make it work or they’re having to cut back.”

Albertans partly owe that to inflation taking a large bite out of wage gains over the past 12 months. Real wages currently outpace inflation by 0.4 percentage points — but only after a long stretch between 2021 and mid-2023 in which year-over-year inflation was more than six percentage points greater than real wages.

Alberta wage growth
The distance between wage growth and inflation in Alberta has narrowed over the past 12 months after several years in which inflation massively outpaced wage growth. Photo by Business Council of Alberta

Albertans’ worsening sentiment is having an effect in the retail sector, too. Compared to January 2023, total retail spending — not adjusted to account for Alberta’s rapid population growth over the past year — was just below 2023 levels. Spending per person (or per-capita spending) was down five per cent compared to a year ago, a trend that applies to most provinces except for Ontario.

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Rising rents are contributing to the broad dissatisfaction, Planincic said, meaning households not carrying debt or mortgages are feeling the strain.

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Alberta businesses’ confidence growing

But a different tale is being told in Alberta’s business community.

Capital spending in all Alberta industries this year is projected to hit $69 billion, on par with the preceding two years and well above numbers posted between 2015 and 2021. That includes $30 billion in spending from the oil and gas sector.

Much of this stability is owed to Alberta’s immense short-term population growth. The province added more than 202,000 residents in 2023 — 4.4 per cent growth in total — the highest since 1981.

Alberta small and medium businesses are slowly growing more confident, according to the Canadian Federation of Independent Business (CFIB). While several points below the historical average, Alberta small businesses posted a confidence index of 51, ranking in the middle among all provinces.

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Higher-than-expected oil prices have also forced economists to change their expectations for 2024. The BCA projected in January that the average price of West Texas Intermediate (WTI) would hover around $78. It’s since bumped that prediction to $83.

That’s partly contributed to Alberta businesses having significantly higher expectations — among the best in the country — than reported in the final quarter of 2023.

More capital investment required: economist

Alberta’s ability to “hold the line” on capital investment is good news, Planincic said. However, the BCA has highlighted several forthcoming federal policies, including the increase to the capital gains inclusion rate, cap on oil and gas emissions and other environmental policies, as likely restraints to new investment.

“When we think about true economic growth that not just grows a bigger economy but will also make Albertans more prosperous, it’s frankly going to require much more capital investment than we’re currently seeing,” Planincic said.

“Good is a lot more than holding the line on investment.”

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