Albertans are tired of affordability struggles, while businesses are confident

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The cost of living is wearing down a growing number of Albertans, even as the province’s economy moves forward more confidently than the rest of Canada, according to a new report.

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

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“If you look at individuals and households, they’re actually not doing very well,” said Alicia Planincic, an economist at BCA.

A third of the way through 2024, 42 per cent of Albertans described their financial situation as “good,” according to a recent Janet Brown Opinion Research survey, the smallest number on record since the data was first tracked. in 2020. That’s down from 54 percent. percent reported just a few 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 enough households being pushed to the edge where all of a sudden they can’t make it work or they’re having to make cuts.”

Albertans are partly because inflation has greatly affected wage gains over the past 12 months. Currently, real wages exceed inflation by 0.4 percentage points, but only after a long period between 2021 and mid-2023 in which year-over-year inflation was more than six percentage points higher than real wages.

Worsening confidence among Albertans is also having an impact on the retail sector. 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 ) decreased five per cent compared to a year ago, a trend that applies to most provinces except Ontario.

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Rising rents are contributing to widespread dissatisfaction, Planincic said, meaning households without debt or mortgages are feeling the strain.

Alberta Business Confidence Grows

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

Capital spending across all Alberta industries this year is expected to reach $69 billion, well on par with the previous two years and well above figures released between 2015 and 2021. That includes $30 billion of dollars in oil and gas sector spending.

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

Alberta’s small and medium-sized businesses are slowly gaining confidence, according to the Canadian Federation of Independent Business (CFIB). While several points below the historical average, Alberta small businesses recorded a confidence index of 51, ranking in the middle among all provinces.

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Oil prices higher than expected They 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 be around $78. That prediction has since increased to $83.

That contributed in part 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 “maintain control” of capital investment is good news given the current moment, Planincic said. However, the BCA has highlighted several upcoming federal policies, including increasing the capital gains inclusion rate, capping oil and gas emissions, and other environmental policies, as potential constraints on exceeding current investment levels.

“When we think about true economic growth that not only grows a larger economy but also makes Albertans more prosperous, frankly it’s going to require a lot more capital investment than what we’re currently seeing,” Plancic said.

“Good is much more than maintaining the investment limit.”

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