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CALGARY, ALBERTA--(Marketwire - Oct. 12, 2011) - Alberta's economy is expected to post solid 3.1 per cent growth in 2011, according to the Provincial Monitor report issued today by BMO Capital Markets Economics.

"High oil prices are again fuelling activity in the energy sector which, in turn, is driving strong labour market performance," said Robert Kavcic, Economist, BMO Capital Markets. "Alberta should see robust growth this year, before cooling to 2.7 per cent next year – almost a full percentage point above the national average."

While West Texas Intermediate crude prices have pulled back from their spring high of nearly $115 per barrel, recent prices around $80 are still sufficient to support investment in the sector. A correction toward $60 and below, however, would likely begin to seriously curtail investment decisions in the sector. "Despite a temporary disruption to production in May due to wildfires, oil production was up 6.5 per cent year-over-year through the first six months of the year, with more robust 8.6 per cent year-over-year growth in crude bitumen production," stated Mr. Kavcic. "Longer term, Alberta is expecting raw bitumen production to rise 14 per cent per year in the next two years, as conventional crude output remains about flat, while natural gas production declines."

Strength in the energy sector has rekindled in-migration and helped firm up the labour market. "Net interprovincial in-migration in Q1 was the highest since early-2008, and has totalled nearly 12,000 people over the past year," said Mr. Kavcic. "Meantime, employment growth was a robust 4.8 per cent year-over-year in September, well above the national pace of 1.7 per cent year-over-year. The public sector has been shedding jobs for the past year, but private-sector employment has surged more than 8 per cent, led by manufacturing and broad-based growth in services."

"The private sector is clearly driving Alberta's impressive employment growth – a sign of our businesses' ongoing strength," said Bill Hogg, District Vice-President, Commercial, Alberta, BMO Bank of Montreal. "It's no surprise that our commercial customers are more optimistic than ever."

Mr. Kavcic also noted that while the recent growth spurt has led to a pickup in measures of cost pressure and capacity constraints, Alberta remains far from the extremes seen at the height of the last boom in the middle part of the last decade.

The Province of Alberta is now projecting a $1.3 billion deficit for fiscal 2011-2012 (0.5 per cent of GDP), a $2.1 billion improvement over the spring Budget, owing to stronger revenue growth (by $2.7 billion). "Non-renewable resource revenue is running $2.3 billion better than budgeted because of higher land lease sales, oil prices and production," said Mr. Kavcic. "These were partly offset by a stronger Canadian dollar. Outlays related to the fires were the major contributor (more than 70 per cent) to the $650 million jump in projected expense. Note, however, that these updated forecasts are based on a $98 average oil price, which looks bullish given the recent pullback."

The full Provincial Monitor report can be downloaded at bmocm.com/economics.