Sunday, May 13, 2012

Alberta Economic Power House

In our post The Coming Real Estate Summer I pointed to the importance of economic growth and population growth for a prosperous real estate market. The Alberta Government released a small pamphlet titled Alberta Economic Quick Facts and it summarizes Alberta’s economic juggernaut brilliantly. Below I’ll show you some important graphs with economic data.

When an economy is prosperous, its people feel secure and that often increases the birth rate and in-migration. The result is population growth and that translates into increased housing demand. Guess what increased housing demand translates in? Yep a prosperous real estate market!

The Quick Facts pamphlet states: “In 2011, Alberta’s population grew by 1.6% - higher than the Canadian growth rate of 1.0%. According to Statistics Canada, this was mainly due to strong growth in the natural increase (births minus deaths), but also in net international and inter-provincial migration.” As of January 2012, Alberta’s population was 3,817,980 with 64.4% living in Calgary and Edmonton.

Alberta’s GDP increased from 3.3% in 2010 to 5.2% in 2011 – not exactly recession territory! Unemployment fell from 6.5% in 2010 to 5.5% in 2011 compared to 7.4% for Canada overall.  In terms of capital projects such as residential construction, infra-structure and oil and gas investments, investments in the province were 81 billion dollars in 2010 and that grew by 9% to 88.7 billion in 2011. That is an investment of $23,461 per Albertan invested compared to $10,758 in Canada.

No wonder our inflation rate is higher than in the rest of the country – 2.4% versus 1.0%. So let’s compare Real GDP which is corrected for inflation and Alberta still is number one by a wide margin (see below).
We’re benefitting from a wealth of natural resources, but that would not amount to much if our government was not pro-business. Venezuela is resource rich but not exactly business friendly and see what that does to that country's prosperity! The U.S. is considered the icon of liberty and market driven economies. So how does Alberta’s corporate taxes compare to that of the U.S.?  Wow, as the graph below shows Alberta has significant lower taxes. Just looking at corporate taxes is maybe simplistic but it goes a long way to tell the story.

You’d think that this government only caters to oil and gas, but that is a misconception. Alberta is definitely on route to a more diversified economy. Look below at how various industries contribute to Alberta’s total GDP and what industries contribute significantly to our manufacturing output. Now here is a notable fact: our industries produced $286.6 billion dollars, now how much profit would that create? Then in the same year, we’re reinvesting $88.7 billion! If this was a corporation we would think it was some very hot high growth business in super expansion mode, but no this is the province of Alberta!

If Canada is currently at the top of economic prosperity for G7 countries, then how does Alberta rank? I think, you’re getting the picture J!

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