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Winnipeg Free Press - PRINT EDITION

Sorting through consumer-confidence polls

Posted: 03/28/2013 1:00 AM | Comments: 0

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It may be difficult to elicit sympathy in some regions of the country for the oil and gas sector when the price of oil falls a little below $100.

But in the increasingly overheated debate about construction of new pipelines, Alberta politicians are talking out loud about how the price gap between Alberta bitumen and West Texas Intermediate is falling and may take some time to get right again if no new pipeline capacity is produced.

The Alberta budget earlier this month announced spending cuts and debt-financing largely blamed on increasing concerns about pipeline capacity.

It was in that hyped-up climate of concern in the oil patch that the Conference Board of Canada embarked on its monthly consumer confidence survey in March.

Nationally, the March index was largely unchanged from the February level, down .04 points to 80.5 (it was 100 in 2002), but in the Prairie region it was down a dramatic 11.9 points to 88.7.

While still much higher than the national level -- after all, Western Canada has been driving economic growth in Canada for some time now -- that is the lowest level in the region since August 2009.

Todd Crawford, an economist with the Conference Board, said the survey that the Ottawa-based think tank has been doing since the early '80s is useful to predict future consumer spending.

"It is a good leading indicator how spending will go forward," he said.

The fact that the Prairie region fell sharply but the national index did not change much this month was because there was a fairly positive response to the survey questions -- about the current and future financial situation, job prospects in six months and the outlook for major purchases -- in Atlantic Canada, Quebec, Ontario and B.C.

Crawford said such a significant regional decline as occurred in the Prairies is rare.

"Since the recession -- the end of 2007 into 2008 - we have seen lots more variability in the Canadian and regional index," he said.

And he also cautioned against taking monthly results out of context.

"What we really want to see is what happens next month," he said. "Do those numbers bounce back some? We may be able to chock these numbers up to a slight overreaction to the budget, a little heightened political rhetoric. If it does bounce back, that will give you confidence for sure."

While Manitoba is lumped into the Prairie region, Crawford said: "If we were doing the provinces separately, I would not expect to see Manitoba would have a decline of the magnitude we are seeing in Alberta."

Crawford said the power of the oil economy ripples through the rest of the economy.

If the lack of pipeline capacity means construction of new oilsands plants -- costing $2 billion to $10 billion each -- will be delayed or shelved, Crawford said that will be felt across the country.

Ian Hudson, an economist at the University of Manitoba, downplays the interconnections between the Manitoba and Alberta economies. As well, he suggests it's not wise to put too much stock in consumer-confidence polling.

"Consumer confidence is unbelievably fickle," Hudson said. "It goes up and down like crazy."

That may be, but the development of multibillion-dollar private-sector industrial projects creates an economic growth dynamic that is undeniable. You can argue about what region of the country might benefit most from the spinoff activity, but it will be there somewhere.

Crawford points out the March survey did show something and it's something we all might want to keep our eyes on.

Alberta has boasted higher wages, lower unemployment rates and a fiscal situation that up until very recently was the envy of every province in the country.

"But those things all look a little more shaky now," Crawford said. "The rules of the game have changed regarding what is going on out there."

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition March 28, 2013 B11

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