Alberta businesses singing Auld Lang Syne

December 20, 2009

By Todd Hirsch
Alberta Business Columnist
Troy Media

Todd Hirsch

CALGARY, AB Dec. 20, 2009/ Troy Media/ — On New Year’s Eve, we tend to look back with fondness and emotion at the year that was.

But sometimes saying goodbye isn’t so bad! A lot of Alberta companies are bidding good riddance to 2009, the year that will go down in history as one of the sharpest economic contractions this province has seen.

But instead of anger or bitterness about the downturn, businesses throughout the province appear to be ready to kiss and make up. The ATB Financial Business Sentiments Index (BSI) points to rising optimism going into the New Year.

The BSI surveys companies throughout Alberta to gauge their opinion and sentiment for the coming quarter. Expectations for the first quarter of 2010 rose to 128.6, after fourth-quarter 2009 sentiment stood at 114.9. First-quarter 2009 sentiment was 99.7. (An index value more than 100 indicates optimism, and less than 100 indicates pessimism.)

The sentiments index for the first quarter of 2010 was up in all six sector groupings in the survey: construction, manufacturing, professional and technical services, transportation and warehousing, wholesale, and oil and gas. The gains were most pronounced in transportation and warehousing, and oil and gas. Construction, while it did post a gain in the most recent survey, is at 86.6 – the only sector still below the neutral 100 level.

The survey was conducted over the period November 24 to December 8, 2009.

But while the rising optimism throughout the business community is decidedly encouraging, it is perhaps a bit surprising as well – particularly in the energy patch. The oil and gas index stands at 141.2, which puts it back up to levels not seen since early 2008 when oil and gas prices were in the stratosphere. Given very weak drilling activity through most of this year, companies could have been excused if they just weren’t feeling the love!

A possible explanation is that steady gains in crude oil prices and improvements in the cost structure of some companies could be the factors driving optimism higher for oil and gas producers. Everything from steel pipe to imported equipment from the US is much cheaper now than it was a year or two ago.

The survey also suggests that companies are gradually gearing up to add staff in 2010. The hiring index for Q1 stands at 117.4, up from 102.2 in the previous survey.

But while the reading is above 100, it indicates that only a small majority of companies are planning on increasing staff. When asked specifically about hiring intentions over the coming 6 months, two-thirds of com-panies (67%) are planning no changes to staffing levels. Nine percent will be adding more part-time staff, and 17% are planning to hire a mix of mix if full- and part-time. Only 7% are planning to hire fewer people in the coming six months.

And through all of this, it must be remembered that the index is a relative measure, not an absolute measure. What the survey is really saying is that businesses are feeling more optimistic about the first quarter of 2010 compared to what they were experiencing in the latter half of 2009. So, given how miserable much of the last few quarters have been for Alberta’s economy, perhaps it is not surprising that companies are anticipating improvements. It’s probably not an exaggeration to say: things can only get better!

So on New Year’s Eve, Alberta businesses will bid no fond farewell to 2009. It’s been a lousy year. Yet they will also stop and give thanks for the blessings of the year as well: lower material costs, higher oil prices, improved global economic conditions… and perhaps most of all, some well-needed relief on the wages and labour shortages front.

Todd Hirsch is Senior Economist with ATB Financial.

Channels: The Red Deer Express, December 31, 2009, Calgary Beacon, January 15, 2010