Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: And now the bad news about B.C.’s economy

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

In a Black Press Media column posted last month, I touched on a number of factors that continue to support economic growth in B.C., of which the most important is a steadily expanding population.

Now, I turn to developments that are dampening growth and casting something of a cloud over the province’s economic prospects in the next six to 12 months.

The first negative trend is sluggish consumer spending. Retail sales in B.C. were in negative territory through the first seven months of 2019. Adjusted for inflation and population growth, retail sales are even weaker.

Consumer spending is being weighed down by softer housing markets and the steep drop in auto sales. Record high levels of household debt are also causing some consumers to cut back on spending.

READ MORE: Canadians’ debt levels hit record highs at end of last year, CMHC says

Turning to housing and real estate indicators, residential home sales have fallen markedly in the last year or so. Recently, however, lower interest rates and earlier price declines have improved affordability, with home sales moving higher.

Some market watchers believe the housing down-cycle is over. But the Ministry of Finance estimates that residential sales in 2019 will hover near 46,000, down from almost 74,000 two years ago.

At the same time, housing starts, which have been fairly strong so far this year, are poised to slump, in line with reduced demand from non-resident buyers and decisions by many B.C. developers to pull back from planned projects.

The provincial government predicts that housing starts will drop by more than one-fifth in 2020.

Dwindling residential investment will detract from aggregate economic growth. It will also work against the policy objective of enhanced affordability, which – among other things – requires an increased supply of new housing units.

KEEP READING: Slow home sales cool B.C. government revenues this year

The deteriorating global economy is another major worry. Slower growth in major external markets, including the U.S., China and Germany, is already beginning to pinch B.C.’s exports.

Through July, the value of provincial exports was down by three per cent from 2018 levels. The forest industry has suffered the biggest blow, with wood product exports sagging by around 20 per cent. There is little chance of a meaningful export recovery in 2020.

The rolling economic crisis in the forest sector is another significant negative in B.C.’s economic picture. Mills are closing and jobs are being lost across the province. Forestry provides one-third of B.C.’s merchandise exports.

The number one issue in forestry is the diminished supply of timber, which is pushing up fibre costs for B.C. sawmills even as North American lumber prices remain low. Higher log costs have led to increased stumpage levies, at a time when the industry cannot absorb rising government-imposed charges.

Logging and lumber companies are also struggling with complex First Nations issues and growing environmental and regulatory costs.

The footprint of the forest sector is set to contract as the industry consolidates in the face of a reduced timber supply. Unfortunately, provincial policies and the lack of attention being given to the long-term commercial heath of B.C.’s leading export industry is making the transition harder and more painful than necessary.

ALSO READ: Truck convoy stalls downtown Vancouver traffic to protest forestry job losses

Finally, B.C.’s (and Canada’s) waning overall competitiveness is another economic headwind, one that is especially evident in the natural resource and infrastructure industries and in key segments of manufacturing.

Many companies in these sectors are postponing capital investments and/or investing elsewhere. Rising taxes on business are part of the explanation, along with complex and increasingly costly government regulatory regimes that are making Canada and B.C. less attractive places to deploy capital.

READ PART 1: A mix of good and bad news about B.C.’s economy

Add it all up, and the Business Council has decided to mark down our B.C. economic outlook for 2019-20.

We now expect growth of less than two per cent this year, rising slightly in 2020 as work accelerates on LNG Canada’s huge natural gas liquefaction plant and related marine terminal in Kitimat.

Job creation should continue, but at a noticeably slower pace than in the recent past. Government policy-makers and business decision-makers should get ready for a bumpy economic ride.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Environment Canada has issued a snow warning for the Kootenays on Friday. File photo
Environment Canada issues snow warning for Friday

Two-to-10 centimetres is expected to fall

Brody Peterson told The Gazette he intends to dispute tickets issued by Grand Forks RCMP at his backyard “house warming” Saturday, Oct. 10. Photo: Laurie Tritschler
Homeowner intends to dispute COVID tickets after backyard party near Grand Forks

Brody Peterson said bands that played at his home shut down before the 11 o’clock cut off

Dave Bachmier said he was “devastated” to find his departed wife’s bench upturned and broken in the wake of road maintenance outside his rural property. Photo: Laurie Tritschler
YRB apologizes after sub-contractor breaks memorial bench on Danshin Village Rd.

Bench was a favourite spot of property-owner’s departed wife

From the left, Retired Fire Chief Dale Heriot (formerly of Grand Forks Fire/Rescue) and Fire Chief Walt Osellame (Midway Fire/Rescue) were given the FCAB’s Meritorious Achievement Award Monday, Oct. 19. File photo
Boundary Fire Chiefs given top honour for fire service

Fire Chiefs Heriot and Osellame were recognized by the Fire Chiefs Association of B.C. Monday, Oct. 19

Join the discussion with Boundary Similkameen candidates. (Photo submitted)
Boundary Similkameen candidates to debate health care tonight

Everyone is welcome to join the online event

Provincial health officer Dr. Bonnie Henry presents modelling of COVID-19 spread in B.C., March 25, 2020. (B.C. government photo)
B.C. sets another COVID-19 record with 203 new cases

up to 1,766 active cases in B.C., two more deaths

RCMP. (Phil McLachlan - Black Press Media)
British Columbia man dies during ski trip near glacier west of Calgary

Kananaskis Public Safety and Alpine Helicopters responded around 2:30 p.m.

Prime Minister Justin Trudeau arrives on Parliament Hill in Ottawa on Monday, Oct. 19, 2020, following a week-long break for the House of Commons. THE CANADIAN PRESS/Sean Kilpatrick
One crisis after another for Trudeau since last federal election one year ago

It has been a year of unprecedented calamity and crisis

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Rio Tinto Alcan’s aluminum smelter at Kitimat competes against producers in the Middle East and Russia that have no carbon tax. (Rio Tinto)
B.C. carbon tax highest in Canada, export industries unprotected

B.C. NDP, B.C. Liberals say they’re looking at exemptions

(Pixabay)
Vancouver teacher suspended after swearing, touching students and complimenting underwear

McCabe touched students, including rubbing their backs and necks, touching their hair and hugging them

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Jack Vellutini, 100, is still making sweet music. Photo: Submitted
Music stirs memories as Trail serenader nears 101st birthday

Jack Vellutini gave his brass instruments to Trail up-and-comers so the legacy of music can live on

Most Read