A Summary of the Past Twelve Months
September 7, 2013
So far, 2013 has proven to be another wild ride for the global economy, and Alberta has been riding both the ups and the downs.
A year ago, in September 2012, the European Central Bank came to that continent’s rescue (again) by announcing a major asset purchase of government bonds, basically, replicating what the U.S. Federal Reserve had done twice previously. The costs of borrowing money fell for Spain, Italy and Portugal, giving them a bit of precious breathing room. That seemed to cheer markets—at least temporarily.
In December 2012, the European Parliament found a way to cut Greece loose from the euro currency, making it the first country to exit the union since its inception in 1999. However, both the Parliament and the European Central Bank sent clear messages that the exit was going to be orderly, and that Spain, Italy and Portugal were all on more realistic paths to gradual recovery. Lifted by these moves, markets started to rally.
Commodities started off 2013 a bit battered and bruised from the financial chaos in the previous three months. After trading wildly between $US120 and $80 in November and December, the North American crude oil price slumped to a low point of $US 83 per barrel at the beginning of the year. However, improved confidence in Europe and stable growth in China cheered investors, and, by March, oil prices had climbed back above $100. Wheat, canola and other crop prices started to ease in early 2013 as moisture levels returned to normal in the US.
After narrowly winning re-election in the U.S., Barack Obama set out a very ambitious economic strategy to boost employment in that country. The unemployment rate on election day 2012 managed to fall to 8.0 per cent—the lowest since Mr. Obama first took office. However, the bitterly divided Congress stymied the President’s back-to-work program that involved massive U.S. spending on infrastructure. The resulting political stalemate has only intensified partisan bickering, and the unemployment rate has climbed back up to 8.8 per cent.
The housing market, which had shown encouraging signs in 2012, has stalled; prices and housing starts have been entirely flat over the first eight months of 2013.
Canada has continued to fare better than most of its G8 peer countries, although that group’s economic performance continues to be a very low bar for comparison. With a bit of a lift in the second half of the year, Canada posted overall real GDP growth of 2.1 per cent in 2012—closely in line with Bank of Canada’s expectations.
With the financial panic in November 2012, the Bank of Canada quickly followed Australia, Switzerland, Norway and other smaller central banks around the world in cutting interest rates. A 50 basis point cut in November moved Canada’s overnight rate to 0.50%, the lowest since the last market downturn in 2009. With improved conditions in February, however, the Bank of Canada reversed that move, and, by September 2013, the overnight rate remains where it had resided for most of the past three years—1.0 per cent.
Alberta’s economy has continued to outperform the rest of the country, and, indeed, much of the rest of the industrialized world. Despite their extreme volatility near the end of 2012, oil prices ended the fiscal year in 2013 with an average price of $US 98, which was just shy of the provincial government’s official forecast in the 2012 budget. The labour market moderated in late 2012, but has remained in a balanced position so far this year.
The unemployment rate in August 2013 was 4.8 per cent, just slightly above the rate of 4.4 per cent it reached in August 2012.
(DISCLAIMER: for those who need this explained to them, there is NO time machine. Travel into the future is STILL not possible. This news clipping is fictional, and should NOT be taken as investment advice. Seriously. I’m not joking. TH)