Business confidence is at its lowest in five years

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Albertans’ confidence in the economy is on the decline

225 of Alberta’s business leaders surveyed in March 2013 indicated that confidence in the economy has been at its lowest since 2007. Albertan consumers’ confidence has decreased as well, but not as sharply as it has in the business world. Volatile oil prices, the recent high-deficit provincial budget and the delay in the Keystone XL project could be major factors attributing to this decline in confidence.

Business confidence

Responses from business leaders show downward trends in confidence levels compared to March 2012. There was a 42.5% decrease of confidence in current business conditions, 28.2% decrease of confidence in future business conditions and a 36.4% decrease of confidence in future unemployment year over year. However, the fiscal conditions index and confidence in future interest rates has remained relatively stable, with only 12.1% and 6.3% decreases respectively.

Business view on the economy

When business leaders were asked if a deficit based budget is needed to position Alberta for economic growth in the medium to long term future, the responses were mixed. About 48% of respondents agreed it was necessary, 44% disagreed and 8% were unsure of what the long term effect of the budget would be.

The majority, 86%, of business leaders feel the delay in approving the Keystone XL pipeline project is negatively affecting Alberta’s economy. Business isn’t hopeful about an increase in oil revenues over the next six months. Around half or 53% of business leaders believe Alberta’s revenue from oil will remain the same, with only one-in-four believing revenue will increase.

“The decline of confidence in the economy may be a result of mixed opinions on the provincial budget strategy versus economic growth, a lack of faith in revenue increase from oil and concerns related to the success of the Keystone XL pipeline” says Ian Gunn, Alberta Private Company Services Leader at PwC Calgary.

Consumer confidence

Compared to their business counterparts, consumers’ confidence in the economy has only declined slightly; 6.1% compared to March 2012. This trend is not unexpected as consumers do not possess the same information as business and tend to lag the business trends by a few months. Additionally, overall confidence indicators amongst consumers are more stable compared to the confidence levels of business leaders. Consumers also expect an increase in future unemployment.

Consumer view on the economy

When asked the same question about the provincial budget as business leaders, half (49%) of Alberta consumers felt the current provincial budget is needed to position Alberta for economic growth in the mid-to-long term future. More people in the consumer group supported rather than opposed the budget (35% oppose the budget).

Keeping in line with the business community, the majority (70%) of Albertans felt that the delay in approving the Keystone XL pipeline is negatively impacting the Albertan economy, with more than a quarter (27%) stating there is a strong negative impact. In identical proportion to business leaders, 53% of Albertans feel that revenues from oil will stay the same during the next six months.

Consumer view on the housing market

In March 2013, consumers felt more pessimistic about buying major household items, with a 12.7% decrease in confidence between January and March 2013. There is a 5.8% decrease in confidence about buying a house. However, confidence in future household income and future interest rates has remained relatively consistent between January and March 2013. At the same time, there has been a drop in housing affordability in Alberta’s main cities compared to 2012. Albertans state that affordability has decreased in Calgary and Edmonton, but has increased in other areas of Alberta.

The PwC Business and Consumer Confidence Index tracks and determines business and consumer confidence in the current and future Alberta economy.