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

Skeena Bulkley Valley MP calling for halt on sport fishing licenses to out-of-province fishers

Bachrach and Courtenay-Alberni MP Gord Johns co-signed the letter to the Minister of Fisheries

Bella Coola Heli Sports closed, says no confirmed cases of COVID-19 reported in their operation

The company has committed to informing the community if a case is reported

COVID-19 case confirmed at Subway restaurant in Cache Creek

Customers who visited the site from March 25 to 27 are asked to self-isolate

COVID-19: Community working to address threat; road closures not supported by province

MLA Jennifer Rice says people should be staying home and non-essential travel is not acceptable

Social media a blessing and a curse during time of crisis: B.C. communication expert

‘In moments of crisis, fear is very real and palpable,’ says SFU’s Peter Chow-White

VIDEO: ‘Used gloves and masks go in the garbage,’ says irked B.C. mayor

Health officials have said single-use gloves won’t do much to curb the spread of COVID-19

Don’t stop going to the doctor, just do it virtually: B.C. association

Doctors encourage patients to access telephone, online visits

Businesses advised to prepare for federal, B.C. COVID-19 assistance

Canada Revenue Agency portal expected to open next week

Dogs are property, not kids, B.C. judge tells former couple

Court decision made on competing lawsuits over Zeus and Aurora — a pit bull and pit bull cross

B.C. senior gives blood for 200th time, has ‘saved’ 600 lives

There was no cutting of cake for Harvey Rempel but he’s challenging youth to start donating blood

Trudeau commits $100M to help food banks amid COVID-19 crisis

Funds will help ‘urgent food needs’ for Canadians awaiting federal emergency benefits to kick in

Couple won’t self-isolate after returning from overseas: Cowichan by-law

New law requires 14 days of self-isolation when returning to Canada

How well can cell phones carry COVID-19? Disinfecting may be wise

‘You want to keep it as clean as you would normally your hands’

Most Read