In today's economic environment, small businesses face pressures from rising prices, shifting interest rates, and evolving customer demands. ATB Financial recently hosted "Empowering Entrepreneurs," a virtual event which helped to equip business owners with knowledge and strategies for navigating and thriving in this complex landscape.
In part one of two, we present key insights from the event's opening session, in which ATB Financial's Senior Economist, Siddhartha Bhattacharya, shared the latest economic forecast and strategic outlook for Alberta's business community.
Read the companion article and dig into our expert panel’s insights and practical applications for business owners.
Global economic growth is projected at 3.2% for 2024-25, with notable variations across regions. As Sid notes, "The U.S. has been surprisingly resilient but is expected to slow from 2.8% GDP growth this year to 2.2% in 2025."
China's growth continues to face headwinds, particularly in its struggling property sector. Meanwhile, Europe shows signs of improvement, with growth expected to increase from under 1% to 1.5% next year, though geopolitical conflicts pose significant risks.
Canada's position is more challenging: "Canada's GDP per capita has been trending lower since mid-2022. Over the last eight quarters, per capita GDP has now fallen in seven of them. We're predicting national GDP growth of only 1.2% this year, improving to about 1.7% in 2025—fairly lacklustre growth overall."
The Bank of Canada's policy rate reductions are significant. "From the 5% rate we saw in July 2023, it has now been pulled down to 3.75%... such large cuts are rare outside of a recession." While inflation has moderated, the cumulative impact remains substantial: "Headline prices (the raw inflation figure reported in relation to the Consumer Price Index) are up 18%, and food prices are up 25% from before the pandemic."
Alberta demonstrates strength in several sectors, the first of which is energy. Oil production in Alberta has averaged under four million barrels per day, a roughly 4.5% increase year over year," boosted by the Trans Mountain expansion.
The tech sector is thriving: "Calgary scored highest among all North American locations in tech talent growth, thanks to affordable housing (compared to other tech centres), low-cost office space and secondary institutions."
Manufacturing shows promise: "Petrochemical manufacturing is set to rise about $4 billion this year, driven largely by one project—the Dow Path2Zero Fort Saskatchewan project—which costs about $10 billion spread over six years."
Retail sales are projected to grow 6% this year and 3% next year. A return to historical growth averages is not expected until 2026-27, highlighting the need for robust job creation to match Alberta's booming population growth.
Labour market challenges persist: "Despite an elevated unemployment rate, there are still pockets of labour shortages. One of the key sectors is construction, with a vacancy rate of about 5%."
Population growth brings opportunities and challenges: "Alberta's population grew by 4.4% this year, adding 200,000 people in one year. For context, that's like adding two Red Deers in one year."
Opportunities
The demographic shift presents unique opportunities: "About 79% to 80% of net migrants to Alberta are now under 40, compared to only 53% of Alberta's overall population. In other words, the new population growth is primarily young people."
Risk management strategies
Sid emphasizes caution regarding consumer spending: "The biggest downside risk remains on the household spending side. Retail sales are slowing each year. After a 6.9% growth in 2022, they're expected to increase by just 5% in 2026."
Future outlook
Alberta maintains a strong position despite challenges: "Alberta remains the highest among provinces [in GDP per capita], though the gap has narrowed over the last decade." The province benefits from "three factors that position our economy to outpace national growth: robust population growth, market access improvements, and diverse sectoral growth."
However, businesses should prepare for potential challenges: "Alberta, like other regions, faces many of the same headwinds: uncertain economic conditions, tighter monetary policy, sluggish global growth, and labour shortages."
Small businesses should maintain cautious optimism while preparing for potential economic shifts. Focus on leveraging Alberta's demographic advantages, diversifying operations, and building resilience against identified risks. The combination of population growth, infrastructure development, and sectoral diversification provides opportunities despite broader economic headwinds
In our second Economic Insights article, our panel explored the practical implications of this economic forecast to Alberta small businesses.