ATB Financial Economist says Alberta’s Economy is “SWOOSHING” Ahead

By schmidt • June 28th, 2009

On June 25th Todd Hirsch, Senior Economist with ATB Financial, presented an informative update on the economy at the REALTOR ASSOCIATION OF EDMONTON.  If you ever have the opportunity to hear Todd speak, don’t miss it!  He has a rare ability to present technical information in an easily understood and even entertaining manner.  Todd entitled his presentation WINDS OF CHANGE and that’s exactly what is blowing… change for the better!  While we’re not talking gale-force winds of prosperity, there are steady breezes of optimism blowing our way! 

Here is my summary of Todd Hirsch’s WINDS OF CHANGE presentation (based on notes taken frantically on my Blackberry!):

Watch copper! Copper tells more of the story than oil as it tells us more about global manufacturing levels and expectations.  Copper prices are rebounding which could be due to possible hoarding by China, however, this could indicate China believes the economy is rebounding and that they will need the resources. 

Watch China!  China will be out of the recession before the US as the Chinese consumer is a saver with money to spend when the recession ends. 

Watch the US. Dec 2007 was the beginning of the recession. The United States is now nineteen months into the recession.  A “normal” recession lasts about nine months, however experts believe there are four to six months to go in this one.  The good news is that the rate of decline in the US economy has improved.  Two ingredients are needed to see the US situation improve:  lenders willing to lend and consumers willing to borrow. Those two things have not yet occurred.  The savings rate in the US is improving as consumers have been forced into changing their money habits as their equity is reduced in real estate and the stock market. This will all take time to turn around.

Watch housing starts!  They say a lot about what consumers are thinking about the future of the economy. There has been one month of improvement in May;  four to five months of improvement is needed in housing starts before anyone will dare to say the situation in the US has “hit bottom”.

Watch oil!  Oil was $147 and is now $68 US per barrel. That’s a huge drop, however things are looking way up since prices bottomed out at $33 per barrel in Dec 2008.  Todd stated that $65-70 a barrel is a workable price for most Alberta producers. He also reported that some local businesses in Ft MacMurray are seeing strong sales this month and real estate prices have not fallen drastically.  At the end of the day, there is not an infinite supply of oil but there is a huge need.  The future looks good.

Watch natural gas prices!  Natural gas prices are more vulnerable and Todd expects that activity will remain low for at least a year until prices come up. However, extreme weather conditions anywhere else in the world will drive gas prices up as energy is needed for air conditioning and heat.

What’s kind of “shape” are we in?  Todd provided an interesting overview of recession patterns.   
  • V  – short term recession with a sharp rebound
  • W – a recession that shows some improvement and with a second (less deep) dip
  • U – this shape occurs when both high inflation and high unemployment occur at the same time, resulting in a high “misery index”
  • L -  The economy drops and stays there at slow or stagnant growth (ie Japan)
  • THE NIKE SWOOSH
    This is Todd’s representation of our current recession.  We have seen the worst in Canada and Alberta, and with the exception of a few ”rough spots” along the way, we should be swooshing ahead at a steady, if not dramatic, pace..


What should we do now?  Businesses need to monitor the trends and be prepared to change and adapt.  And Todd suggests we all lower our expectations just a bit about future growth in Alberta, and we will likely be pleasantly surprised with positive future results.   

Bottom line?  Alberta has turned the corner!

Sounds like pretty good news to me!  Our team is committed to staying on top of the trends in order to help our clients make the best decisions in any market.  We chose to make this presentation a priority this week and ten of us attended! 

Contributed by Kathy Schmidt, Broker Owner of Schmidt Realty Group Inc with thanks to Todd Hirsch, ATB Financial and also the REALTOR ASSOCIATION OF EDMONTON for hosting this event. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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