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Confidence in the economy slipping among Alberta business owners

Confidence in the economy slipping among Alberta business owners

Posted on: 12/14/2018 | Author: ATB Financial's Economics + Research Team

With the dramatic drop in prices for Alberta oil that took place this fall—and the need for a production cut to address the situation—it is not a surprise that Alberta small and mid-sized business enterprises (SMEs) are feeling more pessimistic about the future direction of the provincial economy.

Every quarter, ATB surveys a random sample of 300 Alberta SMEs and asks them if they think the Alberta economy will be better, the same or worse in six months. The same question is asked about their individual businesses. The results are used to create an index of economic confidence and an index of business confidence, both out of 100. The higher the number, the higher the level of optimism. When the index is above 50, more SMEs are optimistic than pessimistic. When the index is below 50, the opposite is true.

As of November, the Alberta Economy Index was sitting at 34.3. That is not as bad as it was during the depths of the recession—it got as low as 19.2 in early 2016—but it is down substantially from 2017 and from earlier this year when it hit 66.4.

SMEs feel a bit better about how their individual companies will do over the next six months than they do about the Alberta economy. The Alberta Business Index was 52.9 in November, down from 69.5 earlier in the year.

If the economic news does not improve, the indices are likely to keep falling. However, if the announced oil production cuts and additional rail capacity—combined with favourable global oil supply and demand dynamics—strengthen Alberta oil prices in a sustained way, the mood may improve over the course of 2019.

Business optimism index graph

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