Saskatoon Region: Q4 2022 Economic Update

The Saskatoon Region finished off 2022 by leading the nation in economic growth, growing 6.3% from 2021.

The sentiment from the local business community is also high, according to The Chamber’s annual Saskatoon Business Barometer, released in October 2022. Survey results showed that businesses are feeling confident in all areas related to business operations, including revenue and supply chain, with the exception of hiring and retaining employees. Overall, 71% of businesses are confident in Saskatoon’s economic outlook.

As to commodities, the Saskatoon Region remains a bright spot for the province and Canada, with agriculture, mining and energy commodities driving growth. Potash sales for the province will see a record year in 2022, brought on by geopolitics stemming from Ukraine-Russia War and rising global demand to feed the world. Crop production has since recovered from 2021’s severe drought, seeing a 55% increase year-over-year, albeit still below average levels. And with oil prices elevated, government and industry revenues and production remained supported.

With the overall sentiment in the economy and economic factors, SREDA has increased its economic rating for the Saskatoon Region from a B- in Q3 2022 to a strong B for Q4 2022.

Key Takeaways for Q4 2022

1. Increased inflation and interest rates continue to effect rate-sensitive sectors and consumers

Inflation rose to 7.3% in Q4 from 6.8% in Q3. Investment sentiment by businesses remains suppressed, primarily in interest rate-sensitive sectors such as construction, food services, transportation and warehousing and retail trade. Also affecting consumers as stubbornly high inflation continues to eat away at their purchasing power.

Economists are predicting interest rate hikes will likely end in 2023, and a reverse policy stance by the Bank of Canada will take place closer to the end of the year, given that inflation has begun to slow on a month-to-month basis.

2. Tight labour market remains as more people leave the labour force

The Saskatoon Region’s unemployment rate continues to fall to 4.0% from 4.1% in Q3. This combined with the participation rate dropping to 68.8% from a decade-high of 73.0% in Q3, has caused the tight labour market that many industries are experiencing.

With high inflation and interest rates leading to higher operational and borrowing costs for businesses, we can expect some to reduce spending and scale back on growth, thus potentially impacting future hiring intentions.

3. Housing market sees very low inventory amidst high demand

Housing starts in Q4 were 36.7% higher than in the same quarter of 2021 due to high demand and low inventory. However, with the rise in interest rates, home sales fell to 789 homes sold, 54.1% lower than in the previous quarter and 28.7% lower than in Q4 2021. A similar trend was seen in new listings, dropping to 1,161, down 68.7% and 12.2% from Q3 2022 and Q4 2021, respectively.

The benchmark price has fallen to $367,167, a decline of 3.9% from the previous quarter but still 4.0% higher than in Q4 2021. With prices elevated and inventories low, vacancy levels will likely remain tight until inventory levels rise.

4. Production, sales and exports of minerals reach record levels

The war in Ukraine has pushed production, sales, and exports of Saskatchewan’s minerals to high levels, even breaking records. In 2022, potash sales reached $16.7 billion, growing 153.6% from 2021 (not including the yet-to-be-released December data). Similarly, uranium sales reached $950 million, increasing 97.8% from 2021.

On the production side, potash products reached 13.3 million tonnes, 3.4% higher than in 2021. Uranium production, which has seen halted or even slowed operations in recent years, grew to 6,920 tonnes in 2022, growing 65.4% from 2021. Overall, Saskatchewan’s metal and mineral exports in 2022 reached $15.7 billion, increasing 128.3% from 2021. And with oil prices elevated, exports of energy products rose 61.2% to $12.9 billion from 2021.

5. Agriculture saw a recovery boost brought on by elevated commodity prices

Following the severe drought in 2021, crop production levels recovered but are still below average at 34.9 million metric tonnes, a 55% increase over 2021 but 13% below 2020.

And although Q4 data have yet to be released, farm cash receipts have surged to $14 billion in 2022, primarily due to higher livestock receipts and direct payments. However, Farm Credit Canada forecasts farm cash receipts for 2022 in Saskatchewan to reach record levels, hitting $20.7 billion, increasing 8.0% from 2021.

Tyler Nguyen

Manager, Economic Intelligence
(306) 952-2400