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Q1 2021 – Why we’re keeping a B- rating for the local economy

With Q1 2021 behind us, SREDA is maintaining the Saskatoon Region’s economic rating at a B-. Here’s why:

COVID-19 vaccination rates

Since our last snapshot, COVID-19 cases and vaccination rates have both climbed. A variant-driven third wave of the pandemic has emerged, but more than 40% of adults in Saskatchewan have received their first dose of a COVID-19 vaccine. Vaccination rates are expected to increase significantly over May and June as more vaccines become available, boding well for recovery.

Business & consumer confidence

Almost two‑thirds of Canadian businesses’ sales have reached or exceeded pre-pandemic levels, and many businesses intend to increase their investment spending to meet growing demand. Likewise, consumers expect to increase their spending, in many cases reflecting pent-up demand. Consumer spending will continue to be a critical part of fueling business recovery and growth.

K-shaped recovery

Some parts of the economy are growing steadily while others continue to face challenges. Tourism-related sectors and food and accommodations services are bearing the brunt of pandemic restrictions, but more recovery could occur later in the year as vaccination rates climb. Meanwhile, industries such as finance and insurance and professional, scientific and technical services that can adapt more readily to pandemic restrictions are trending higher.

Commodities

Commodity prices remain a bright spot that is expected to last throughout 2021. Agri-food exports surged on growing global demand last year, resulting in a record year for Saskatchewan. Stronger grain prices bode well for potash production, and construction and renovation also continue to see investment growth. Oil prices in both WTI and WCS have now risen to pre-pandemic levels, but it will likely take time for industry investment to fully recover. Long-term demand for uranium is also expected to grow, and Cameco recently announced plans to restart its Cigar Lake mine.

Saskatoon growth forecast

Steady recovery in the Saskatoon CMA is expected, with Q2 growth of 1.2% followed by 1.1% in Q3 (Table 1). The unemployment rate in Saskatoon rose slightly higher in Q1 2021, up to 8.4% from Q4 2020’s 8.1%, as a result of more people entering the labour force.

Table 1: Economic Growth Forecast for Saskatoon CMA

Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021
Quarterly GDP (%)-0.3-8.95.82.61.21.21.11.1

Source: Conference Board of Canada

Saskatchewan growth forecast

According to the average of five major Canadian financial institutions and Canada’s leading economic think-tank, Saskatchewan saw an economic contraction of 4.9% in 2020. Growth of 5.3% is expected for 2021, followed by 3.6% in 2022 (Table 2).

Table 2: Consensus Economic Growth Forecast for Saskatchewan (%)

Financial Institutions20192020f2021f2022f
RBC-0.7-4.25.23.8
TD-0.8-5.45.83.9
BMO-0.7-4.55.33.2
Scotiabank-0.7-5.25.93.6
National Bank of Canada-0.7-4.84.93.5
Conference Board of Canada-1.1-5.24.83.5
Consensus Economic Growth-0.7-4.95.33.6

Source: RBC, TD, BMO, Scotiabank, NBC and CBoC

Saskatchewan’s population growth has begun to recover in Q1 2021 after seeing two consecutive quarters of decline, but employment levels fell, raising the unemployment rate to 7.4%, up from 7.1% last quarter. 

Looking ahead

A strong rebound for 2021 is still anticipated despite the recent rise in COVID-19 cases. Many indicators point towards recovery, including growth in residential construction, agri-food exports, potash and oil & gas.

Table 3: Key Indicators of the Saskatchewan Economy

Indicators20192020f2021f2022f
Real GDP (y/y % change)-0.7-4.95.33.6
Nominal GDP (y/y % change)0.1-7.812.16.0
Employment (y/y % change)1.7-4.62.82.4
Unemployment (%)5.58.46.86.0
Housing Starts (x 000s)2.43.13.73.4
Retail Sales (y/y % change)0.3-1.33.12.2
CPI (y/y % change)1.70.62.22.2

Source: RBC, TD, BMO, CIBC, Scotiabank, NBC and CBoC

SREDA is committed to providing timely, balanced and digestible information about the performance of the local economy. If you have questions or feedback, contact us at info@sreda.com.


Tyler Nguyen

Specialist, Economic Intelligence
(306) 664-0724