Spring in predictable for certain things: Easter, the budding of tulips, and turning the clocks ahead one hour. But for economists in Canada, the end of April heralds in another predictable and highly anticipated event: the reporting of provincial GDP. Unlike the monthly and quarterly reports for the national economies, the tallying of all goods and services produced at the provincial level is done only annually.
In the competitive race among the provinces, where in the standings did Alberta place?
After a hard knock in 2009, Alberta came roaring back in 2010 with inflation-adjusted growth of 4.0%. That is the fastest rate of expansion since the go-go days of 2006, when the economy surged by 6.2%. It’s also the highest level of growth among the provinces… well, with the exception of Newfoundland and Labrador, which took top honors last year. That province expanded by 4.8%.
Still, Alberta is a much larger province than “The Rock,” which has a population of less than half that of the city of Calgary. So it takes much less of an increase in economic activity in Newfoundland and Labrador to get growth of 4.8%. Another western province, British Columbia, took third place with real GDP growth of 3.8%. The February 2010 Olympics and a rebound in the forestry industry contributed to growth on the west coast.
What was contributing to Alberta’s sprint in 2010?
In a word, oil. After bottoming out in March 2009 at close to $US 33 per barrel, global oil prices came racing back over the past two years, ending 2010 close to $US 100 a barrel—essentially tripling in value. These higher prices spurred drilling activity, particularly for conventional crude oil, heavy oil, and the oilsands. After having come to a screeching halt in two years ago, investments in the oilsands rebounded very nicely. The Wood Buffalo region of northeastern Alberta was the first in the province to see its employment picture return to its pre-recession levels.
Support activities for oil extraction, such as drilling rig manufacturers, also contributed to growth, as did gains in residential and electric power engineering construction.
But as Statistics Canada reports, it wasn’t just oil and electricity that boosted growth in Alberta last year. Agricultural production increased as Alberta enjoyed more favourable growing conditions than its Prairie neighbours, where severe floods destroyed much of the crops. In contrast, the economies in Saskatchewan and Manitoba expanded by a mere 1.4%, the very weakest growth among all the provinces.
Offsetting growth in Alberta were declines in non-residential construction, and some weakness in natural gas engineering construction. Natural gas prices have never really recovered from the 2008-09 downturn.
But even though Alberta’s economic growth is close to tops in the country, the expansion in 2010 really represents a lot of catching up. With weak expansion of 1.2% in 2008, and a big contraction of 4.8% in the recession year 2009, last year’s growth brings the provincial economy back to the level of overall activity seen in late 2007.
Alberta’s back, but it’s taken almost three years!