How critical is Fort McMurray to Canada's general economy? StatsCan counts the ways
How important are the Alberta oil sands to Canada's overall economy? The answer depends on who you ask.
In May, wildfires in northern Alberta took over 1.2 million bbl/day of oil production offline for over a month, representing 30% of Canada's total oil production. Several pipelines were taken out of service. Maintenance activity stopped. Deliveries of goods and services were halted. Refineries and chemical plants curtailed due to lack of feedstock.
Although it was expected that oil production would take a big hit in May, economists were waiting to see the trickle-down effect. Statistics Canada shed some light this week:
- non-conventional oil extraction (or bitumen production) fell by 22% in May
- petroleum refining fell 15% on feedstock shortages
- manufacturing of non-durable goods (big suppliers to the energy sector) fell 2.8%
- chemical manufacturing declined 3.9%
- support activities for mining and energy declined 3.3%
- rail transportation had its worst performance since 2013
Canadian GDP contracted 0.6% in May, the steepest one month decline since 2009. Excluding the bitumen production outages, the economy still contracted 0.1%.
StatsCan also released dismal employment data last week. The government reported a sharp jump in May's Employment Insurance (EI) recipients across the country. Alberta saw a whopping 12.1% m/m gain in beneficiaries with significant increases recorded in Newfoundland and Labrador (+2.9%) and BC (+1.8%). Year to date, the number of EI recipients in Canada is up 2.4%.
The number of new EI claims paints a bleaker picture. Claims rose by a staggering 69.8% in Alberta during the month of May, the biggest increase since 1997. Claims also shot up in PEI (+21.5%), Saskatchewan (+9.7%), Nova Scotia (+6.0%) and New Brunswick (+4.1%). Yet another reminder that the Fort McMurray oil sands employ Canadians from across the country, not just Alberta.
By all accounts, most economists expect the wildfire impacts to be transient and temporary in nature. The Bank of Canada expects the Canadian economy to rebound sharply in the third quarter, to an estimated 3.5%.
June's GDP numbers will be release on August 31, 2016.