“Nothing is certain except death and taxes,” Benjamin Franklin once said.
However, my economics teacher, Mr. Kay, would change that and say; “nothing is certain except death, taxes and economic cycles”.
Just like the weather, where spring follows winter, he would point out that recessions follow decline, recovery follows decline, and growth follows recovery (still with me?), and – sometimes, just sometimes – growth can be in the form of a boom.
And if it comes to a choice between agreeing with Benjamin Franklin or Mr. Kay, my money is on Mr. Kay. Every time.
The question is: is Saskatoon booming? And let’s not have one of those sit on the fence answers. I’ll just come out and say it: Saskatoon is at the start of a boom cycle. But I can hear Mr. Kay saying “prove it.” So, here’s the evidence.
Let’s start with a definition. A boom can be described as “a period of rapid economic growth where key economic indicators are rising significantly.” Call me Webster. Typically, the key indicators would be: employment, consumer spending, investments, commodity prices, and an increase in inflation and GDP (quarter over quarter). So, let’s take a look at some of these indicators:
Higher inflation: In February 2022, inflation has risen 4.3% from February 2021, and 5.3% from February 2020. Rising inflation? Check.
Granted, there are different views on whether rising inflation is good or bad, but one thing for sure is that it tends to drive consumer spending – which in turns drives the economy.
When prices are going up, people want to buy now rather than pay more later. This increases demand in the short term. As a result, stores sell more and factories produce more now. They are more likely to hire new workers to meet demand. It creates a virtuous cycle, boosting economic growth. The key is keeping a “good” rate of inflation, and managing expectations of future inflation.
Lower unemployment: Canada’s unemployment rate fell to the lowest level since at least the mid-1970s. I’ll say that again – lowest! In Saskatchewan, after the unemployment rate rose to a record high of 14.2% during the pandemic level, it has since fallen to 4.6% in March 2022 – significantly lower than pre-pandemic levels. Falling unemployment? Check.
Increased consumer spending: Saskatchewan retail sales in early 2022 have risen 11.3% over 2019 levels – that’s a huge increase coming out of a period of economic decline during the pandemic. Increased spending? Check.
Increased investment: Investments in building construction have risen 10.2% since January 2020, primarily supported by a robust residential sector, which has risen 42.2%. Check.
Increasing property prices: In March 2022, residential property prices have increased, coinciding with strong demand, rising 6.7% from 2020 prices. Check.
Higher commodity prices: Current oil prices have surpassed levels not seen since 2012 to 2014. At the start of the year, WTI Crude Oil prices were hovering around $60 USD/bbl, reaching highs of almost $120 USD/bbl in March 2022, a 100% increase. And we’ve seen price rises in wheat, oats, uranium, and more. Check.
And finally, my favorite economic indicator – consumer confidence. When people have confidence in the economy they tend to spend more – which in turn leads to economic growth. This indicator may be more subjective, but there’s a certain amount of positive business news that is spurring confidence lately. For example: FCL announced a $2B Integrated Agricultural Complex, including the construction of a $360M canola crushing plant (a joint venture with AGT Foods) and renewable diesel facility; 2021 agri-food exports reached $17.5B, an all-time high; and Nutrien is boosting potash production to 15 million tonnes in 2022, accounting for 70% of global production. I could go on.
I’d ask Mr. Kay to review the argument set out above, just to make sure it’s a solid economics case, but he’s busy enjoying life in a small rustic farm house in the south of France. But, maybe I don’t need Mr. Kay after all, because the data backs it up. The cold hard stats say Saskatoon has moved past recovery, and is entering a boom cycle (let’s hope it continues over the months ahead). Now we just have to believe it.
Like I said, my money is on Mr. Kay, every time. Sorry Benjamin.
That’s what’s on my mind, let me know your thoughts?
p.s. see the graphs below that also tell the story…