indicatorThe Twenty-Four

The Weekly Wrap

Up, down and sideways: Population, inflation and a failed coup

By Rob Roach, ATB Economics 30 June 2023 7 min read

In this week’s ATB Economics Weekly Wrap…

  • Inflation cooler, but not cool enough;
  • Failed Russian coup highlights ongoing geopolitical uncertainty;
  • Alberta continues to gain lots of residents from the rest of Canada;
  • Job vacancy rate stubbornly high;
  • GDP growth flat in April, but forecast to rise in May;
  • Happy Canada Day!

What happened this week?

Overall price growth slowed in May - Tuesday’s Consumer Price Index (CPI) report was good news in that the national inflation rate fell from 4.4% in April to 3.4% in May—its lowest level in two years. Price growth in Alberta also slowed, falling from 4.3% in April to 3.1% in May. Although down from the double-digit readings at the start of the year, the inflation rate for food purchased from stores was still red hot at 9.2% in Alberta and 9.0% nationally. As illustrated in the Chart of the Week below, the inflation rate for mortgage interest costs in Canada (provincial data are not available) was an incredible 29.9% in May—the highest rate of growth on record.

Bottom line: Even though headline inflation in Canada ticked down in May and will likely do so again in June due to lower year-over-year energy prices, it remains above the Bank of Canada’s target of 2% and underlying price pressures will make it difficult to close the gap in the short-term. On its own, the May price report is unlikely to change the Bank of Canada’s view going into its July rate decision.

The Russian rebellion that wasn’t - Wars, coups, power struggles, and saber-rattling are ever-present sources of human suffering and economic disruption. The failed coup in Russia that unfolded over the weekend is a poignant reminder that a former superpower is conducting a protracted ground war in Europe.

Bottom line: The global economy has, in a sense, adjusted to the war in Ukraine, but it is still akin to a bottle of unstable nitroglycerin rattling around in the backseat of a speeding car. With no clear end in sight and the potential for things to get even worse, the war continues to be a major downside risk.

Alberta’s population boom continued in Q1 - Statistics Canada released population data up to the end March and it was another good quarter for Alberta. Net interprovincial migration increased Alberta’s population by 15,786. Notwithstanding that both Canada and Alberta have a larger population base than in the past, it is still impressive that Q1 saw the sixth highest net inflow into Alberta from other parts of the country on record. Including net international migration and natural increase (births less deaths), Alberta added a total of 56,594 residents between the beginning of January and the end of March 2023. At 1.2% compared to 0.7%, Alberta’s first-quarter growth rate outpaced the national average. And, as the latest population update from Alberta Treasury Board and Finance points out, Alberta “has the highest natural growth rate, the youngest average age, as well as the lowest proportion of people aged 65 and over” of any province.

Bottom Line: While population growth presents some challenges, it is both a sign that Alberta’s economy is doing well and a source of economic growth as the additional residents work, spend and invest in the province. Lower shelter costs, ongoing economic strength, a high quality of life and a relatively young (albeit still aging) population will continue to support Alberta’s population growth.

So far in the census year (July 1 to June 30), net interprovincial and international migration into the province between July 1, 2022 to April 1, 2023 stands at just over 145,000, which is more upbeat than what we had expected in our most recent economic outlook released on June 8. As a result, we now expect Alberta’s annual population growth to exceed our earlier forecast of 3.2%.

Job vacancy rate still running high as of April - Statistics Canada’s Survey of Employment, Payrolls and Hours has a two-month time lag, but it is a valuable source of information on job vacancies. As of April and adjusting for seasonal variation, there were 94,310 job vacancies in Alberta (up from 91,615 in March) and the job vacancy rate was 4.4%, up slightly from 4.3% the month before. Although down from the peak of 5.3% set in April 2022 (the data series only goes back to May 2015), Alberta’s vacancy rate remains well above the level seen before the pandemic. Nationally, the number of vacancies fell and the vacancy rate edged down by a tenth of a point to 4.4%, but, as with Alberta, this is still high compared to pre-pandemic levels.   

Bottom Line: While an elevated job vacancy rate is a good thing if you are looking for work and have the appropriate skills and experience for which employers are looking, empty positions create significant headaches for employers and are a drag on economic growth. On the bright side, vacancy rates have come down from last year’s peaks. Ongoing labour shortages and their concentration in sectors such as construction, restaurants, tourism and oil and gas, however, remain a cloud over the Alberta economy.

Canadian economic output flat in April - National seasonally-adjusted real GDP growth was essentially unchanged from March, falling short of the advance estimate of +0.2%. GDP growth in March was, meanwhile, revised up from zero to 0.1%.  Statistics Canada’s advance estimate for national economic growth in May is 0.4% with the bounce back from April’s Public Service Alliance of Canada strike offsetting the negative impact of the Alberta wildfires.

Bottom Line: As is the case with the inflation numbers, the fact that economic growth slowed in April is probably not enough to convince the Bank of Canada to hold off on at least one more 25 basis point rise in its policy interest rate.

What to watch for next week

Work, work, work: Labour Force Survey results for June come out on July 7 - If you are a fan of the TV show “Stranger Things,” you know that the Upside Down is an alternate dimension existing in parallel to the human world where things are, to say the least, rather weird. With central banks actively trying to sloweconomies via higher interest rates to rein in inflation, it feels like we have slipped into an economic version of the Upside Down. As such, many analysts are “hoping” to see some weakness in the labour market measures, most notably wage growth, coming out next week.

Bottom line: If the national labour market stays hot, this could push the Bank of Canada toward another interest rate hike in July. While Alberta is an important part of this larger picture, it will be the national data, not what happens in Alberta’s labour market, that will carry the day on the rate hike decision. Alberta’s job market has outperformed national year-over-year employment growth in 22 of the last 24 months.

Interesting fact…

As with home prices, while it is not cheap to rent an apartment in Alberta, it is cheaper than in a lot of other places in Canada. According to data compiled by, the average monthly rent for a vacant one-bedroom apartment in Vancouver in June 2023 was an astonishing $2,831. In Toronto, it was $2,538. Rents in Calgary ($1,632), Red Deer ($1,256), Edmonton ($1,176) and Lethbridge ($1,162) were, comparatively-speaking, much less expensive. Grande Prairie had the lowest average rent of the 35 cities on the list at $1,023, just below Regina at $1,079. The average rent for a one-bedroom across the 35 cities on the list was $1,828.

Chart of the week: Mortgage interest inflation has gone through the roof 

More pain on the way - Our chart of the week illustrates the dramatic impact the Bank of Canada’s battle against inflation is having on the cost of having a mortgage in Canada.  According to the inflation report from Statistics Canada, “the mortgage interest cost index rose 29.9% on a year-over-year basis in May following a 28.5% increase in April. For the third consecutive month, this was the largest increase on record, as Canadians continued to renew and initiate mortgages at higher interest rates.” The recent run-up in interest costs stands in marked contrast to the period from October 2020 to June 2022 when interest costs fell 21 months in a row. Admittedly, interest rates have been higher in the past and the recent increases are relative to when the Bank of Canada’s trend-setting policy interest rate was set at almost zero. But, because the ratio of house prices to income has increased and mortgage rates have gone up so quickly, the pain felt by current borrowers is very real.

Bottom Line: We knew that the aggressive interest rate hikes made by the Bank of Canada would increase the cost of borrowing in Canada, including the cost of carrying a mortgage, but the spikes evident in the CPI data are still startling.

Daily trivia

Answer to the previous trivia question: The London School of Economics and Political Science started operating in 1895.

Today’s trivia question: The month of July was named for the Roman general and statesman Julius Caesar. In what year did he become Dictator of Rome?

Mortgage interest cost inflation in Canada was up 29.9% versus 12 months earlier in May 2023

Mortgage interest cost inflation in Canada was up 29.9% versus 12 months earlier in May 2023

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