In this week’s The Seven…

• Holiday party tips from ATB Economics
• For data nerds, Christmas comes early
• A ‘what will Trump do’ forecast
• 2024 year in review
• Interesting Fact: Tis the season for giving
• Chart of the Year: Alberta bound

We made it! This is our 250th and final Twenty-Four Seven of 2024. Thank you for reading our commentaries and answering our trivia questions. We hope that it helped inform your decisions, think about the world in a different way, or sound a little smarter at a cocktail party.

Throughout the year, we get comments and questions from our readers. Thank you. This helps us sharpen our thoughts and be more responsive.

Holiday party tips from ATB Economics

As a token of our appreciation, we have a holiday gift you definitely didn't ask for: economics topics for your next holiday party based on the events of 2024! Check out the video. And for those who are really keen, a written guide.

Facts and figures for all

For Alberta data nerds, Christmas came early. To complement our daily Twenty-Four Seven commentaries and quarterly outlook, we’ve added an interactive table and charts page. Check it out here. 

Peering into the 2025 crystal ball - ATB’s December Economic Outlook

We are switching battles. Tiff Macklem, Governor of the Bank of Canada, has all but declared victory in the battle against inflation. Great news, and we can look forward to a period of lower interest rates and more stable inflation.

But keep the champagne on ice. Just as inflation cooperates, a new concern has risen to the forefront as we enter 2025—a geopolitical one. President-elect Donald Trump will be inaugurated on January 20, 2025 and has threatened to impose sweeping tariffs. The next year will be about negotiations on border security and tariffs. The Canadian political scene is also unstable at the moment, with Finance Minister Chrystia Freeland resigning and now more questions about a possible federal election and who will be at the negotiating table.

As for Alberta, we can see momentum entering the new year. The province is leading on a number of fronts: housing starts (the highest in November since 2007), population growth (a gain from interprovincial migration for 13 straight quarters), and solid pick up in job growth in the last two months. Oil production continues to set new records and has been a major driver of both Alberta’s and Canada’s growth this year.

All this momentum sets the stage for another year where Alberta will be among the provincial growth leaders—if not the leader—again in 2025.

And yet things can change on a dime.

I know economists have a reputation for caveats and disclaimers surrounding their forecasts: ‘heightened uncertainty’ and ‘risks are tilted to the downside’ are common refrains. But this is truly a wild time to be putting out a forecast. It’s a scenario-based exercise: tell me what Trump will do, and I will give you a forecast.

For our December outlook released Wednesday, we dealt with this uncertainty in the usual fashion—by running scenarios: low, base, and high.

Our base case is that some type of tariff is in place. We assume a 10% tariff, but that Trump elects to exclude oil and gas to avoid higher energy costs (Trump has promised to lower these costs for Americans). In that scenario, Alberta is poised for a decent year of growth at 2.5% real GDP

For the pessimists, if Trump does proceed with 25% tariffs, and Canada retaliates (i.e. a trade war), we see a recession unfolding with a 0.3% decline in GDP in our low case.

Now for the optimists, and this is not one’s tendency given all the negative news floating around, there could be robust growth of 4%. That would unfold if there was minimal trade action and if some big projects proceed (think Pathways carbon capture and storage, or more AI data centres, for example).

We spent a lot of time on this forecast, talked to experts, and ran our Alberta model. We are confident, but also humbled by the cumulonimbus cloud of geopolitical uncertainty. We look forward to keeping you abreast of the events of 2025 as they quickly unfold. Buckle up!

What a year!

We finish with a list of 10 economic events affecting Alberta in 2024:

1. This barrel of oil went to market: The Trans Mountain Expansion (TMX)

We couldn’t think of a single project in 2024 that moved the economic needle as much as TMX. Coming online in May, oil production has surged, the light-heavy price differential has stayed narrow, and Alberta crude is making its way to Asia. Oil production has been one of the principal drivers of Canadian export volumes this year.

2. People power: Record population growth

Alberta kept adding droves of people from other parts of the country and around the world with a record-setting 204,209 more residents on July 1, 2024 than the year before—the equivalent of about two Red Deers in just 12 months. The pace of growth was a little slower in the third quarter, but Alberta once again led all provinces and is closing in on the five million mark. While Alberta’s labour market has been churning out jobs faster than other parts of the country, there are even more job seekers and this has sent the unemployment rate higher. The interprovincial migration story was particularly fascinating—we’ve never seen anything like this. So intrigued, we wrote a report about it.

3. Out of control: Wildfires ravage Jasper

You never want to see people fleeing their homes, but nearby wildfires led to an evacuation order at 9:59 PM on July 22, 2024 for the townsite of Jasper and the surrounding national park. Nearly 5,000 residents and 20,000 visitors were forced to flee westbound on Highway 16 toward British Columbia. The economic impact was severe with 358 of the town's 1,113 structures destroyed and Jasper National Park attendance falling from over 473,000 in August 2023 to zero in August 2024. Jasper’s recovery will be a key part of the ongoing growth of Alberta’s tourism industry.

4. Start me up: Housing construction spikes

Housing starts in Alberta hit the second-highest level on record in November, rising to 59,486 (seasonally adjusted annual rate)—41% higher than the previous November. The record of 59,924 was set in September 2007 during the housing boom of the mid-2000s. The increase reflects a construction sector that is playing catch-up with the rapid population growth noted above.

5. Mission accomplished? Inflation under control and interest rates coming down

It was a long and painful slog, but 2024 marked the return of the national inflation rate to the magical (to central bankers at least) level of 2% in October. Indeed, from January through November, the rate stayed below the upper end of the Bank of Canada’s 3% to 1% target range. Past price growth still weighs on consumers, but the taming of the inflation monster was welcome news. At the same time, the Bank’s trendsetting policy interest rate has been reduced from 5% to 3.25%. According to our latest forecast, we see the Bank making three more cuts next year, taking the policy rate to 2.5% by June.

6. Moving downstream - A rise of value-added energy

Alberta’s economy has been adjusting to much lower levels of upstream oil and gas investment over the past decade. That is, less investment in the extraction side of the business. In 2024, we estimate oil and gas extraction investment was $35 billion compared to $63 billion in 2014. And yet, oil production continues to set new records as companies optimize existing assets (see item #1).

Now let’s look downstream. By this, think about how oil and gas and agriculture products are transformed into value-added products—refined petroleum, hydrogen, petrochemicals, and biofuels.

In this category, investment has taken off. The largest project that reached FID in 2024 was Dow’s Path2Zero at over $11 billion (including ancillary investment)—the first net zero carbon emissions petchem facility of its kind. Then there is the Air Products Hydrogen Facility and Imperial Oil’s Biodiesel plant (scheduled to start next year). Investment intentions for chemicals, plastics, and petroleum product manufacturing more than doubled to $4 billion in 2024.

7. Tech takeoff

Alberta’s tech sector has taken off in recent years and is positioned for further growth. From 2019 to 2023, tech companies in Alberta have raised more than $2.7 billion in venture capital funding. For the first time, Alberta overtook B.C. as the third largest province for venture capital raised in the first half of 2024 and Calgary scored highest among North American locations in tech talent growth by  CBRE over the last five years. At the same time, data centres have been in the news with eStruxture announcing that it will be building a $700 million data centre in Calgary, the provincial government launching its Artificial Intelligence (AI) Data Centres Strategy aimed at attracting $100 billion in investment over the next five years, and O’Leary Ventures signing a letter of intent to purchase land near Grande Prairie for a proposed AI data centre industrial park that could lead to $70 billion in future investment. We see tech remaining a high-growth sector for the province. Stay tuned for an forthcoming report by ATB on this emerging sector.

8. Break the class: Canada’s productivity emergency

Only an economist would put ‘productivity’ on a top 10 list, but the topic has emerged as a pressing concern that was even called an “emergency” by the Bank of Canada’s Senior Deputy Governor Carolyn Rogers. In a nutshell, productivity is waning and that means our standard of living is in jeopardy. We did a paper that discusses this national challenge with a greater focus on Alberta. The question we posed (food for thought over the holidays) is how can Alberta maintain a productivity advantage that is largely driven by oil and gas and continue to diversify? Put another way, what does productive diversification look like?

9. Wither the loonie? Canada and U.S. divergence

First it was the divergence between the economic growth trajectories of Canada and the U.S. (Canada’s GDP per capita has been shrinking during the battle against inflation while it has been growing in the U.S.). This troubling difference has not gone away, but a second related source of divergence has emerged that is having a significant impact on the exchange rate: a resilient U.S. economy has kept inflation stickier and the U.S. Federal Reserve on a slower path of interest rate cuts than in Canada. It’s not the only factor (the stronger growth in the U.S. and the tariff threat are also in play), but looser monetary policy in Canada has helped push the loonie below the symbolic (and very real if you are buying stuff from, or traveling in, the U.S.) 70-cent level. We see the loonie averaging around 71 cents U.S. next year.

10. Trump Part II: Tariffs

We saved the most uncertain economic factor for last: President-elect Trump. For our forecast, we considered  two broad schools of thought on potential tariff action that Trump may take and the impact on the Alberta economy. The first argues that the tariff threat is a negotiating tactic that, with effort and a dash of luck, Canada can largely dodge by improving border security. This camp also argues that there are good reasons to think that Canadian oil and natural gas will be exempt from any tariffs, which would remove the threat from Alberta’s (and Canada’s) largest export to the U.S. The other school of thought is worried that the tariff threat will be carried out and with gusto. It sees a blanket 25% tariff being imposed that dramatically hinders Canada’s economy.

As noted above, we are in the first camp for our base case and consider this a higher probability scenario. But we also consider the possibility of  the second for our low case. In any case, this is the most important risk that we are tracking. It’s not just about tariffs. For example, while this may be a longer shot with big hurdles to overcome, a revival of the Keystone XL pipeline during a Trump presidency would be a major boost for the province.

Interesting Fact…Tis the season for giving

Economists should spend more time talking about the charitable sector. Imagine a world without volunteers and charities. Individuals and the economy as a whole would suffer. At this time of year, we reflect with gratitude (Canada is not perfect, but we are fortunate to live here), and also think of those who may not have as much or are struggling with various life events.

The latest tax data from 2022 shows that 528,000 Alberta tax filers made a charitable donation. Total Alberta donations claimed on tax returns were $1.8 billion, up 8.2% from 2021. The median donation was $580, third after Nunavut ($900) and Manitoba ($590), but far exceeding the national median of $380.

Chart of the Year: Alberta bound

There are so many candidates, but we’re going with population. Alberta’s population surge has driven everything from housing to the labour market.

As our Chart of the Year shows, international migration has been the principal driver of the population burst. But it also shows why Alberta’s population has been growing fastest in Canada. The reason: interprovincial migration and, as we’ve explored in depth, it has a lot to do with relative housing affordability, jobs, and (to a much lesser extent) remote workers.

Alberta started gaining residents from interprovincial migration again in the third quarter of 2021. Since then, just shy of 100,000 residents were gained from other parts of the country with almost 31,000 added over the first nine months of this year. It was the resurgence of interprovincial migrants that pushed Alberta’s population growth to 4.4% (year ending July 1), outpacing all provinces and far exceeding the national 3% increase.  

Merry Christmas, Happy Holidays and All the Best in the New Year from ATB Economics. We’ll talk again in January.

This is the last question in our 12 Days of Economic Trivia series. We hope you have enjoyed the look back at 2024 and we hope to see you in 2025 (which is when you will have to wait for the answer to today’s question).

Answer to the previous trivia question: Alberta exported 156 billion dollars worth of goods to the U.S. last year (89% of its total international merchandise exports).

Today’s trivia question: Canada and the U.S. have been on different economic tracks recently. The U.S. has posted positive economic growth per person for nine quarters in a row. How many times did Canada’s economy grow per person over the same period?