Author: Brett Gartner
The context of this economic profile and forecast for BC is not sunshine and lollipops—far from it. With the US as the epicenter, worsening economic conditions, uncertainty, and the instability in financial markets have swept across the globe. Forecasts of short-term economic growth have been consistently downgraded—often sharply—for major world economies. Canada is no exception. Some forecasts suggest that the Canadian economy will grow less than 1% in real terms, something that has not happened since 1992. Regional disparities in economic performance within Canada remain, with western provinces—including BC—faring somewhat better than central Canada so far this year.
Although employment growth in BC has slowed, growth through August of this year has been better than in most other parts of Canada. Moreover, BC’s employment growth is not down dramatically from the average growth for this period over the preceding five years. Nationally, on the other hand, the rate of employment growth so far in 2008 has been considerably weaker than in recent years.
Consumer spending has played an important role in BC’s economic expansion in recent years. increasing 5.5% annually on average for the past five years. However, recent data show that second quarter 2008 retail sales grew only 1.6% from the previous year, the lowest percentage increase in five years.
After growing for seven consecutive years, the total value of building permits in the first six months of this year is down 8.8% from the same period in 2007. Private and public sector investment—construction and investment in machinery and equipment—continue to grow, albeit at a slower pace than in recent years.
The state of BC’s forestry sector has gone from bad to worse. In 2007, the industry experienced one of its worst years in decades. Employment, exports, and production levels all dropped significantly. The bad news carried over into 2008, with numerous mill closures and large job losses. The industry has been facing a long list of issues including the collapse of the US housing market and the strong Canadian dollar.
BC’s export sector had the worst performance of all provinces last year, and exports from the province are on track to fall for the third straight year in 2008 due in large part to the sharp decline in forest products exports.
Like the rest of Canada and most of the world, BC is confronted with a great deal of uncertainty when it comes to short-term economic prospects, and any forecast at this stage must be read with even more caution than would normally be the case. It is, however, possible to say this with a high level of certainty: economic growth in BC has slowed. This year and next, BC’s economic growth will yet again exceed the national average but will come in well below the six year average of 3.4%. The Canada West Foundation expects real economic growth in BC of 1.5% in 2008 and 1.3% in 2009.