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

Just Posted

Kingfisher Resort unveils spectacular winter light display

A must this winter season is the Kingfisher Oceanside Resort & Spa’s… Continue reading

Nearly 200 people participate in annual Jingle Bell Run at Seal Bay Park

The Comox Valley Road Runners held their annual Jingle Bell Charity Fun… Continue reading

Opening day delayed at Mount Washington

Dec. 6 was set as opening day but will now be delayed due to lack of snow.

Vandalism at three schools in Comox Valley over weekend

School district estimates cost of damage to be about $2,000

Coroners service investigating following death of 19 Wing Comox firefighter

19 Wing noted William Vant Erve passed away from an accident while climbing on Vancouver Island.

VIDEO: Rockslide closes Highway 93 in Fairmont Hot Springs

Geotechnical team called in to do an assessment after rocks fell from hoodoos

Illicit drug deaths down, but B.C. coroner says thousands still overdose

Chief coroner Life Lapointe says province’s drug supply remains unpredictable

Trustees ask for more help after tearful meeting on B.C. school’s ‘toxic’ stench

Enforcement has ‘no teeth,’ school trustee says, while kids become sick

One of B.C’s last surviving strip clubs baring all again for Christmas charity

25th annual event is Sunday and raises money for the Maple Ridge-Pitt Meadows Christmas Hamper Society.

University of Victoria researchers develop industry-changing ‘hyper-glue’

‘Cross-linking’ technology already playing a role in performance body armour

Threats to the Fraser River at ‘new zenith,’ says river conservationist

The ‘Heart of the Fraser’ should be deemed ecologically significant according to ORC statement

Grandparents raising children: Shuswap grandma sees need for support

Peer group formed for those who have unexpectedly taken on the role of parenting

Final appeal rejected for man convicted in deaths of missing Alberta seniors

Lyle and Marie McCann were in their 70s when they left their home in St. Albert in 2010 and vanished

Thieving gun-toting Santa breaks into Princeton restaurant, makes icing sugar sandwich

The suspect allegedly made a sandwich of icing sugar and ham

Most Read