Editor’s Note

Alberta’s small businesses have always operated at the intersection of global forces and local realities. Today, that intersection has become increasingly complex.

This inaugural edition of the Quarterly Small Business Pulse is a collaboration between ATB Economics and our Entrepreneurial Growth team. Our goal is straightforward: to move beyond  the headlines and provide Alberta’s small business community with a better understanding of the environment they are operating in.

Our first report is organized around three core themes for Alberta small and medium enterprises (SMEs) heading into the second half of 2026: the labour market, consumer inflation and retail spending, and input costs. Each section pairs economic data with practical takeaways developed by our Entrepreneurial Growth team.

We want these reports to be focused on what’s most important to you, so please send us your feedback, questions, and suggested topics. We hope you find it useful and look forward to hearing your thoughts! 

- Carol Kamel (Economic Analyst), Bontu Galataa (Regional Advisor, Entrepreneur Growth) & Paige Ross (Senior Manager, Entrepreneur Engagement)

The current economic backdrop - Growth despite headwinds

It doesn’t address all of the challenges facing SMEs, but Alberta stands out as one of the (if not the) fastest growing economies in Canada. In our latest quarterly Alberta Economic Outlook, ATB Economics upwardly revised Alberta’s 2026 real GDP growth to 2.7%—nearly double the national forecast of 1.3%. The adjustment was driven by higher-than-expected oil prices due to the Iran war and a resilient provincial labour market. 

For the provincial government and oil producers, the impact of higher oil prices on revenue is positive. For Alberta’s SME community, the picture is more complicated, and it’s important to recognize why this period of revenue growth is not your typical energy boom. 

Historically, high oil or natural gas prices triggered a provincial "spillover" of new drilling, labour inflows, and robust retail spending. Today, that transmission is limited, exacerbated by three primary factors:

• Trade uncertainty: U.S. tariffs and concerns over the future of the Canada-United States-Mexico Agreement (CUSMA) have tempered investment appetite. Many businesses have adopted a "wait and see" approach, keeping capital on the sidelines until the trade landscape stabilizes.
• Sector restraint: Energy producers are now prioritizing efficiency over expansion. We expect capital spending in the oil and gas sector to grow, but only modestly this year as firms focus on utilizing existing infrastructure.
• Selective spending: High costs for essentials like fuel and groceries are causing households to be more selective in how and where they spend. This change in spending patterns means the discretionary "boom" typical of past cycles is being redistributed toward daily necessities.

However, despite the dampening effects mentioned above, there are a variety of diverse industries in Alberta that are bright spots. These include activity expanding across tourism, technology, aviation, petrochemicals, and agri-food processing. 

Alberta also carries a key advantage over many other provinces in the current trade environment; the province is much less exposed to the sectoral tariffs that aren’t exempt from CUSMA resulting in a lower tariff burden than other provinces. 

The bottom line for business owners: Alberta is navigating a unique environment of both headwinds and tailwinds. While the province is outperforming the rest of the country on a number of economic health indicators, consumers and businesses continue to face elevated costs and uncertainty. 

Alberta’s small business ecosystem

Small and medium-sized businesses are a crucial part of Alberta’s economic engine. SMEs employ about 60% of Alberta’s private sector workers, in line with the national average. 

Underneath these numbers, a notable trend has surfaced with respect to business formations. The Canadian Federation for Independent Businesses (CFIB) has termed it Canada’s entrepreneurial drought, marked by more businesses exiting than entering the market since early 2024, including in Alberta. This decline can be attributed partially to natural transitions but "unhealthy exits" are being driven by regulatory burden, rising costs, labour challenges and an uncertain economic environment.

While these forces are at play in Alberta, our exposure to the energy sector has had a notable impact due to global price volatility that affected firm survival and discouraged new entrants.

Alberta-specific data is not available, but the report by CFIB also highlights that the shrinking Canadian business landscape is currently strained by a 24% rise in insolvencies since 2019 and a looming retirement wave, with 75% of owners exiting soon, but only 9% possessing a formal succession plan. 

Sentiment check 

The CFIB Business Barometer, which aims to measure small business optimism through the use of forward expectations for business performance, is a helpful tool to understand how businesses are actually feeling. In Alberta, the long-term index, which tracks 12-month forward expectations for business performance, has rebounded since the end of 2025.

However, with the outbreak of the conflict in the Middle East and the resulting energy price shock, the barometer rose to 58.4 in April. Readings above 50 indicate that a majority of businesses expect performance to improve, despite the sensitivity of small business sentiment to external shocks, we find ourselves in a much better place than just a year ago.

Alberta’s labour market

Alberta’s labour market is recalibrating in 2026. After several years of especially strong gains in non-permanent residents (NPRs) and a return to a net inflow of residents from other parts of Canada, the narrative in Alberta was one of strong job growth, but even stronger population growth.

A dramatic drop in NPRs has shifted this narrative toward more normal levels of population growth which is helping to reduce the gap between the number of jobs and the number of job seekers. This has resulted in a lower unemployment rate than a year ago (7.2% in March 2025 versus 6.5% in March 2026). The job vacancy rate has also come down from its pandemic peak, but labour shortages persist, especially in sectors like construction and accommodation and food services. Overall, ongoing job creation and falling unemployment will provide an economic lift as more households have more income to spend. 

For SMEs navigating hiring decisions, a tighter labour market, aging workforce, and slower population growth mean that:

• The labour force is growing at a slower rate, making finding workers more difficult.
• There will be fewer foreign workers to fill positions.
• Finding workers with the right skills and experience will continue to be a challenge.
• Finding employees in rural areas will get more difficult.
• There will be upward pressure on wages due to a more limited supply of workers. Alberta maintains the highest average weekly earnings in Canada ($1,358 vs. $1,320 nationally), but the "Alberta Premium" has narrowed significantly since 2014.

Good Advice:

Alberta’s labour market has entered a new phase. With federal caps on NPRs, finding labour for roles that were once easier to fill will be a challenge. Alberta’s population growth is forecast to slow to 1.1% this year while job growth of 3.1% is expected. The pool of workers available is shrinking just as the demand for them is rising. Labour might now be your most expensive and difficult to find resource, particularly in rural regions where the mismatch between skills and open roles continues to grow.

Advice: If you can’t find the people, you may have to fix your process. Invest in efficiency now so you aren’t constrained by a tightening labour market. In this environment, retention is your best recruitment strategy. However, if you’re a rural employer, as of April 1, the federal government has created some exceptions to its 10% cap on temporary foreign workers. Focus on keeping your “A-team” happy, because replacing them will likely cost you a premium. 

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Consumer inflation and retail spending

Although past price spikes are still hanging over the economy and almost certainly contributing to concerns about the cost of living, the inflation rate has been “under control” for some time now. The annual growth in the Consumer Price Index (the main measure of consumer price change in Canada) was 1.9% in Alberta (the Bank of Canada’s target is 2%). This is positive news, but the details suggest that the pain from inflation is not over:

Key consumer inflation trends in Alberta

• Rent: Residential rent remains elevated compared to a few years ago, but its growth has cooled, falling to 3.8% in 2025 from 12.5% in 2024.
• Food: As with rent, food prices are much higher than a few years ago, but the rate of growth has slowed. Food prices rose by 3.1% last year versus 8.3% in 2022 and 7.3% in 2023.
• Energy: Gasoline prices have spiked due to the Iran war. As higher oil prices spill over into other areas, we will see price growth increase across multiple categories. How long this persists will depend on the duration of the war and how long it takes for oil prices to return to pre-war levels.
• Cumulative impact: As the second chart below illustrates, despite the recent improvement in the inflation rate, past spikes have led to higher overall prices that are still stretching the finances of many households and businesses. 

Alberta retail sales: Under pressure, but holding up

For Alberta SMEs whose revenue depends on what consumers choose to spend and where they choose to spend it, interpreting consumer spending trends is an important task.

Retail spending in Alberta was resilient last year, increasing by 4.4% on an annual basis. But with the conflict in the Middle East is already pushing up inflation and potentially more costs are going up as higher energy and fertilizer prices pass through to other goods and services. At some point, this could translate into lower retail sales as more consumers delay major purchases or run out of savings and credit.

While the risk that consumers could start to pull back their spending is real, our base case assumes that the impact of the war will be brief enough that the resiliency we’ve seen to date will continue. In this regard, Alberta—which faces a lower average tariff rate than other provinces and is getting a nominal economic boost from higher oil prices—is expected to be a particularly strong performer with annual retail sales growing by over 4% this year. 

While the recent numbers are positive, consumer confidence is fragile, with many, especially lower-income, households struggling. 

Key trends:

• Opposing forces: Growth is supported by employment growth, past interest rate cuts, and stock market gains (for those households that hold these assets), but is hindered by slower (although stronger than in other provinces) population growth, mortgage renewals at higher rates, persistent concerns about the rising cost of living, and general uncertainty about the economy.
• The income gap: Recent data suggests that the consumer landscape is experiencing a widening divide. The wealthiest 20% of households now hold two-thirds of the nation’s wealth. Conversely, the bottom 40% of the wealth distribution accounted for 3%, most being negatively impacted by a number of macroeconomic conditions, leading to worsening net-saving as the cost of living outstrips income growth, likely forcing this demographic to rein in discretionary spending.
• Auto influence: Motor vehicle sales remain a major driver of overall retail volume with interest rates falling and post pandemic supply chain challenges getting resolved. As people catch up with their vehicle purchases, we expect momentum in this category to slow.
• Tourism shines: A bright spot has emerged with tourism as tourist spending in the province reached record highs last year (more on this below). This positive trend is expected to continue in 2026.

How do consumers feel?

As economists, we tend to steer away from talking about feelings. However, we tend to make an exception when it comes to surveys on consumer sentiment. Consumer confidence is one of the foundations of retail performance, and right now it's fragile. 

• Sentiment index: The Bloomberg Nanos Canadian Confidence Index fell to 46.9 in April 2026 (down from 53.8 in March), indicating net-negative sentiment.
• Key concerns: All four components—personal finance, job security, the national economy, and real estate—are currently trending below historical averages.
• Spending plans: The Canadian Survey of Consumer Expectations for the fourth quarter of 2025 show consumers are actively reporting weaker discretionary spending plans for the remainder of the year.

Tourism as a silver lining

If one area of Alberta’s consumer economy stands out as positive, it’s tourism. According to Travel Alberta, visitor spending in the province reached its highest-ever annual level at $15.2 billion last year. As for 2026, international visitors to Alberta hit an all-time high in January 2026, up 7.2% to start the year, aided by better direct air access (particularly out of Calgary) 

Meanwhile, Alberta's restaurant and bar sector kicked off the year with record-breaking January sales exceeding $1.15 billion, a 9.5% year-over-year increase. This builds on last year's strong momentum, which saw a 5.9% rise in annual revenue. The surge is largely driven by a combination of international tourists, domestic visitors, and continued local support through dining out and ordering in. However, while top-line sales are thriving, the sector continues to face rising operating costs and, in some regions, labour shortages. 

Good Advice: 

The Alberta consumer is playing a game of “budget gymnastics.” As high fuel and grocery costs are squeezing household wallets, spending is being reallocated. While some Albertans are cutting back on discretionary trips, others are redirecting their travel towards domestic experiences.  

As we head into the summer of 2026, we’re watching a unique tourism tailwind. With the World Cup hitting B.C. and Ontario this June, Alberta is positioned to serve the spillover of international fans using the province as their mountain bridge. Expect international tourists to flood the Rockies and cities like Calgary and Edmonton between games. This trend is already in effect as international visitor numbers through Alberta were up 7.2%. Alberta’s push for  all-season resorts, in part to compete for tourists who may otherwise choose B.C., is expected to provide a further lift. 

Advice: Even if you aren’t a sports bar, this influx of travelers is a revenue gift. Don’t just ask people to “Buy Local” because it’s local, market the premium quality of Alberta-made products. International visitors are looking for world-class experiences. The visitors will be here, don’t let them just drive past your business. 

Input costs

For any small business, operating costs are critical. While on the consumer side, headline inflation has cooled from its 2022-2023 peaks, 2026 brings new pressures from the war in the Middle East along with ongoing tariff-related uncertainty. Since headline CPI does not reflect industrial input costs, this section looks at the Industrial Product Price Index (IPPI) and Raw Materials Price Index (RMPI) to explain why business-level price levels remain high despite slowing consumer inflation.

Input prices for businesses

Producer price indexes track the upstream costs that eventually squeeze SME margins.

• Industrial Product Price Index (IPPI): Tracks the prices manufacturers receive for their goods (e.g., lumber, food, metal products) at the factory gate, excluding taxes and shipping.
  • After posting a 3.7% increase last year, it rose 7.9% y/y in March 2026—the 18th consecutive monthly increase—signaling that production-level costs are still climbing.
• Raw Materials Price Index (RMPI): Measures the cost of unprocessed goods (e.g., crude oil, metal ores, logs) and includes duties and customs for imported materials.
  • Similar to the IPPI, it posted significant jumps last year and surged  24% y/y in March 2026. This spike reflects the geopolitical tension in the Middle East, but even prior to this, the index experienced eight consecutive quarters of growth.
• Another key input for businesses are wages. According to the Labour Force Survey’s average hourly earnings data, average hourly rates increased 2.7% y/y in 2025, a step down 4.1% the previous year. The upward trend appears to be continuing into 2026, evidenced by consecutive monthly wage growth gains on a y/y basis.

Good Advice:

The surge in energy prices boosts the value of Alberta’s economic output,  but that doesn’t necessarily trickle down through all aspects. Our headline CPIinflation forecast for 2026 (2.5%) is a useful metric for gauging the trends in inflation on the consumer side, but it doesn’t necessarily reflect what SMEs feel in their margins. The real story for your margins is captured better in indices like the IPPI and RMPI. Due to the conflict in Iran and neighbouring countries, what we’re calling the Hormuz Premium, the cost of raw materials, fuel, and fertilizer are expected to surge this year. 

Advice: Don’t just absorb these costs and hope for the best; that’s how you burn through capital. With interest rates likely holding at 2.25% for the foreseeable future, you finally have a window of predictability. Use this time to lock in your cash flow forecasts and renegotiate terms while things are somewhat stable. Most importantly, revise your pricing strategy. Raising prices without losing customers may not always be possible, therefore try to find ways to integrate new tech or AI tools to automate manual tasks. Every hour you save is capital you don’t have to spend.

In conclusion

Alberta’s SMEs are navigating a unique economic moment—outperforming the national average on a number of indicators, while balancing significant headwinds. Our aim is to provide you with tailored insight to help you better understand the environment you operate in and use that information to support your decision making. We’d love to hear from you; your suggestions ensure we keep tackling the topics and the trends that matter most to you.

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Did you find this inaugural edition of The Quarterly Small Business Pulse helpful? We hope it provides the context you need to navigate Alberta’s complex economic environment.

Strategic decisions are better with a second opinion. We encourage you to check in with your experts—and if you’re ready for a banking review, our Business Advisors are ready to help.

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