BRITISH COLUMBIA, August 15, 2019 – B.C.’s economy proves it is not immune to the fragile state of the global economy as it suffers the flow-on effects of weakening trade, growth expectations and investment, according to Central 1’s latest B.C. Economic Outlook.
Central 1 Deputy Chief Economist, Bryan Yu, said that external global trade uncertainty will cause the province’s annual economic growth to slip from 2.4 per cent to 2.2 per cent in 2019, marking the slowest pace since 2015.
“Economic growth is limited by the weak global trade environment, reduced consumer spending and the downturn of the forestry sector,” said Yu.
The local forestry sector has experienced a sharp downfall after robust activity in early 2018.
“High lumber prices in 2018 has driven excess production, which alongside demand conditions this year has resulted in a 40 per cent decline in lumber prices and mill closures,” said Yu.
Fortunately, B.C. is buoyed by a strong labour market, growing population and strong building cycle.
“B.C.’s strong labour market is apparent in the unemployment rate tracking near a historic low of 4.6 per cent while job vacancy rates continue to be the highest in the country at 4.4 per cent. Housing starts have also posted record activity, having surged by 16 per cent in the second quarter of 2019,” said Yu.
Delayed impacts of the housing slowdown are expected to puncture the supportive backdrop.
“Record housing starts is a result of strong pre-sale activity in previous years and does not reflect current conditions. We expect a four per cent decline in starts this year and a steep 15 per cent decline in 2020,” said Yu.
With strong spending in the public sector to support a growing population, and major projects driving economic growth —the economy is expected to stay afloat.
“Government investment in public schools and hospitals has contributed to more than a 60 per cent increase in building permits this May.”
“Construction of LNG liquified natural gas plant and associated pipelines in the northwest and construction of the Site C dam in Peace will boost the economy through to 2021. Once construction of the LNG plant is complete, production and exports of natural gas will pick up,” said Yu.
Export growth is forecast to trend at a weak 1.5 per cent over the forecast period due to economic slowdown in the U.S. and China and lingering global trade uncertainty.
Highlights from the report:
- Economic growth projected to trend modestly above two per cent through 2022
- Global trade uncertainty and weaker forestry sector a drag on 2019 growth
- Solid new home construction trends expected to stumble in 2020
- Consumer demand supported by tight labour market and rising population
- Major project construction remains a key economic driver
Read the full B.C. Economic Forecast Outlook report that provides a deep dive into current economic trends, the macro economic environment, population growth and employment.
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