Trump good for Alberta?

By Geoff Lee

November 15, 2016 12:00 AM

SEEN THE WORST OF IT Todd Hirsch, chief economist of ATB Financial, spoke about Alberta's economy during a Nov. 10 EARN breakfast meeting at the Lloydminster Golf and Curling Centre. GEOFF LEE LLS PHOTO

The election of Donald Trump as the next president of the United States sets up a possible good news/bad news scenario for Alberta’s economy.
However, the immediate impact from the Nov. 8 election is uncertainty.
That’s the opinion of Todd Hirsch, chief economist of ATB financial, who spoke about it during an EARN breakfast at the Lloydminster Golf and Curling Centre on Nov. 10.
“We just don’t know exactly what kinds of policies Mr. Trump is going to introduce when he becomes the president next year,” said Hirsch, prior to his presentation.
Hirsch said Trump said things during his campaign that could be negative for Alberta, such as ripping up the North American Free Trade Agreement (NAFTA) and other trade restrictions.
The bright side, he said, was the possible approval of the Keystone XL pipeline that could transport Alberta crude to the U.S. Gulf Coast.
“President elect Trump is much more favourable for that pipeline project, so that is, I guess, a net positive for Alberta,” said Hirsch.
He cautioned if Trump takes an isolationist position that might not bode well for Canada and Alberta.
“We’ll have to watch very closely to see what he does when he becomes president,” said Hirsch.
Aside from approving Keystone, Hirsch thinks the best case scenario for Alberta would see Trump introducing policies favourable for the energy sector and the oil sector and not pull the U.S. out of NAFTA or the Trans Pacific Partnership.
No matter what Trump does, Hirsch said ATB Financial is forecasting economic growth of 2.1 per cent in 2017.
He emphasizes that kind of modest growth in 2017 will largely go unnoticed following a seven per cent contraction in the past two years.
“I think it’s still going to feel kind of recessionary in Alberta with the unemployment rate remaining elevated— a lot of people struggling to find work,” he said.
“I do see by the end of 2017 things improving, the job market starting to improve, optimism starting to improve.”
Hirsch’s topic on Alberta’s economy was Have We Reached a Bottom Yet?
The answer to that, he said, is a bit complicated.
“I think with respect to oil prices, I think we’ve seen the worst of this downturn, but with respect to the labour market, I think we still have some struggles ahead of us.”
On oil, Hirsch expects to see prices continue to hover between $45-50 a barrel for a while longer with the top threat of oversupply coming from U.S. oil shale production, not OPEC.
“I think that’s why every time oil tries to get up to the $55 mark, a lot of U.S. shale oil can come on the market very quickly,” he said.
He noted with oil more permanently around $50, it actually makes it easier for industries outside of the oil and gas sector to actually compete for the first time.
“It opens up all kinds of new possibilities,” he said.
Hirsch said what he loves about Alberta and Lloydminster in particular, is its valuable entrepreneurial resource that few other places in the world have.
“That is what is going to build a strong economy in the future,” he said.
He told the Source the ATB branch in Lloydminster is doing well because of the strong entrepreneurial character of the region it serves.
“Lloydminster is one of those great communities, hard hit obviously by the downturn— but a wonderful entrepreneurial spirit in this city,” said Hirsch.
ATB is a financial institution owned by the province of Alberta that works as a full service bank for clients, small business, entrepreneurs, agriculture clients and large businesses.
Hirsch says a pick up in consumer sentiment and optimism in 2017 will give other sectors of the Alberta economy a boost.
“I think in 2017, we will see continued stability in the retail and the housing market— anything driven by consumer sentiment,” he said.
According to ATB’s forecast, over the last 12 months, retail sales are only down by 3.8 per cent and ahead of 2012 and 2013 levels.
A bump up in retail sales is expected in 2017.
New housing starts have fallen about 31 per cent compared to the previous 12 month period and will remain in the range between 20-25,000 for the rest of 2016.
“The construction industry in this province has shown a real resilience—they know how to manage these types of downturns,” said Hirsch, who noted they pull back on new builds to react to the market.
“That has been helpful in stabilizing the housing market and prices.”
One of the bright spots in the economy this year is forestry with strong prices for lumber, pulp and paper and panelboard.
A strong U.S. housing market and a low Canadian dollar have yielded record prices for lumber exports in 2016.
Tourism is also good.
Looking ahead, however, ATB notes the softwood lumber agreement with the U.S. expired a year ago and Trump’s election generates more uncertainty.
In agriculture, Hirsch sees lot of potential for growth in the ag food market with more locally grown food and food products including organic food.
“People will pay a premium for locally produced higher quality food and that changes the balance in favour of small niche food production here in Alberta,” he said.

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