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Business in Vancouver: Brexit: The sky won't fall, but the British pound has

British citizens have voted to leave the European Union, according to British press – a move economists say will not likely affect Canada's trade relations with the UK, but which could push the UK into recession and further cool an already “tepid” global economy.

In a referendum June 23, the leave camp was declared the victor by major media outlets even before the vote was finalized.

Trade between Canada, the UK and the European Union is not likely to be affected much by Britain’s decision to leave the EU, say a number of Canadian economists and political scientists.

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“It’s the knock-on the effect on Canada, including British Columbia, from an even weaker economy, recognizing it’s already weak without Brexit,” said Jock Finlayson, economist and chief policy officer for the Business Council of BC (BCBC) “Growth is pretty tepid, at about 3% per year.”

The British pound's fall will boost safer haven currencies, including the Canadian dollar, economists say.

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Business in Vancouver: Gas a big part of British Columbia’s carbon diet

B.C. risks falling behind Alberta and Ontario on climate change policies and will blow its greenhouse gas emissions diet with a single liquefied natural gas plant.

That’s the gist of recent criticisms, including damning letters from climate scientists and the government’s own Climate Leadership Team (CLT), on B.C.’s climate change policies and liquefied natural gas (LNG) ambitions, which are being characterized as incompatible.

But has B.C. really become a climate change laggard? Or is it so far out in front that it can afford to pause until the rest of North America catches up?

An update to B.C.’s 2008 climate change action plan is expected sometime this month. Federal Environment Minister Catherine McKenna is keen to see it, because it could factor into her decision on whether to approve Petronas’ Pacific NorthWest LNG project in B.C.

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When the Business Council of BC (BCBC) compared B.C.’s carbon tax with all other jurisdictions, it concluded that the province’s carbon prices are already “among the highest in the world.” (While the price is higher in some European countries, it is applied less broadly than in B.C.)

It has already had negative impacts on B.C.’s cement industry and greenhouses, so the province has hit the pause button to avoid crippling energy-intensive industries like mining, cement plants and pulp and paper mills.

“It would probably contribute to a gradual shrinking of those sectors, if there was not some relief,” said BCBC chief economist Ken Peacock.

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TruckNews.com: BC trucking industry on steady climb

It may not have achieved the lofty numbers of the real estate sector, which grew by 23% in British Columbia this past year, but the trucking industry still saw some steady growth, up over 5% in 2015.

During a speech at the BC Trucking Association’s (BCTA) annual AGM Meeting and Management Conference in Kelowna, BC April 10-12, Ken Peacock, chief economist and vice-president for the Business Council of BC, told conference attendees that the trucking industry in Canada’s most westerly province was doing quite well.

“In this post-recession environment – 2010, 2011 onwards – the growth of the trucking industry has outpaced other industries,” Peacock said. “From these numbers that economists looked at, it would appear to be a good-news story for your sector.”

Peacock underscored this point by calculating industry averages in growth from 1997 to 2014, and found that the trucking sector in BC had grown by 3.3% over that period, ranking it 21st on the list of all industries in the province.

“Often in this province you hear people say that the future is all high-tech and all knowledge-based industry and we can’t continue to develop resources, and that’s not at all the story,” Peacock said. “The resource industry is part of the mix and part of BC’s success, as well as high-tech and knowledge-based industries. I absolutely despise that narrative that it’s an either-or; to me it’s a both.”

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Peter O'Neil, The Vancouver Sun: Central bank's 'talk down' of hot Vancouver housing market won't work: B.C. economists

The Bank of Canada’s bid on Thursday to “talk down” Vancouver’s skyrocketing housing market will likely fail, say B.C. economists.

In an unusual move, Governor Stephen Poloz warns in a report that soaring housing prices in Toronto and especially Vancouver are unsustainable and that a “correction” is possible if the economy falters.

Poloz also says the surge appears to be driven in the two markets on the assumption by buyers that the recent, staggering increases will continue.

The benchmark price for a detached home in Metro Vancouver soared to more than $1.5 million in March, 37 per cent higher than a year earlier, according to the Real Estate Board of Greater Vancouver.

The governor is engaged in an age-old practice by central bank leaders of using words rather than action to temper enthusiasm, said B.C. Central 1 Credit Union chief economist Helmut Pastrick and B.C. Business Council chief economist Ken Peacock.

But that warning, and government hints of possible policy changes to deal with the impact of deep-pocketed foreign investors, won’t likely frighten determined buyers, they said.

“I don’t see the market cooling any time soon,” said Pastrick, though he agreed that annual increases in the 20- to 30-per-cent range are unsustainable.

But he said only a major recession would, as Poloz acknowledged, cause a significant market “correction” that would move prices south, according to Pastrick.

Peacock said the central bank is hoping to avoid a real estate “bubble” that could cause serious economic damage if it bursts. One of the key elements of a bubble — purchases made solely on the assumption price surges will continue — is clearly driving many purchases, he said.

Like Pastrick, he said it will take more than a Bank of Canada press release to contain the speculative frenzy in many Metro Vancouver markets.

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BIV on Roundhouse Radio: Ken Peacock, Stewart Muir and Matt Horne

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Roundhouse Radio: BCBC's Chief Economist, Ken Peacock on the Canadian Economy

Following the Bank of Canada rate announcement, Ken Peacock joined the Business in Vancouver team on Roundhouse Radio to discuss implications for the Canadian economy. (Begins at 32 minute mark.)

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Business in Vancouver: Report on Vancouver's economy highlights threat of residential real estate disconnect

The soaring price of residential real estate is one of the biggest impediments to Vancouver’s economy, and could weigh on future business growth and formation, says a prominent local economist.

“How do you grow a global-scale company in Metro Vancouver if your employees, particularly your employees in the age where they start families, can’t afford to live here?” said Jock Finlayson, vice-president and chief policy officer for the Business Council of BC.

“Looking ahead I am fearful of a hollowing out of corporate Vancouver.”

Vancouver falls squarely in the middle of the pack when it comes to economic performance, according to a report comparing Vancouver to 20 other cities in Canada and around the world. Vancouver comes in ninth on economic benchmarks and seventh on social factors. The Conference Board of Canada report was commissioned by the Greater Vancouver Board of Trade (GVBOT).

While Vancouver scores high on quality of life, housing affordability is a big negative. The city also scores low on income levels, labour productivity and the size and number of head offices.

“We fall down on what I would call some of the core economic measures: productivity, incomes, productivity growth over time, and we fall down on housing prices.”

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For Finlayson, the bright spots in Vancouver’s economy — like the growing tech sector — are overshadowed by the exorbitant price of real estate.

“This disequilibrium between median household income and the cost of living, particularly the cost of [housing], is the single biggest problem we have in this region,” he said.

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Business in Vancouver: Canadian forestry finding its footing despite market challenges

[Excerpt] Forestry company executives might also need to start factoring more global economic data into their decisions. 

Their industry is increasingly affected by oil-linked currency fluctuations, changing demographics that affect home-building – their bread and butter – and a “choppy” and “risk-prone” global economy facing innovations of its own, including unprecedented low, and in some cases negative, interest rates.

The good news is that market conditions and profits are improving for Canadian lumber and pulp and paper producers.

The recent numbers are promising. 

First-quarter financials show that B.C.’s major forestry companies have been posting increased earnings, thanks to higher lumber prices, a low Canadian dollar and an improving U.S. housing market.

U.S. housing starts were up 6% in the fourth quarter of 2015 compared with Q4 2014, according to PwC. 

New housing starts in the U.S. have been recently calculated to be an average of 1.1 million. Business Council of BC chief economist Ken Peacock said they’re forecast to rise to 1.2 million to 1.4 million between now and 2025.

“Essentially, the story is low interest rates, better job market and demographics are going to continue to drive the U.S. home-building market over the next five to six years,” Peacock said.

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King 5: Seattle, Tacoma ports battling much smaller BC neighbor

Remote just begins to describe it.

As legend has it in these parts, Ketchikan is about 60 miles away as the crow flies.  It's tough to get here by road.

Yet, Prince Rupert, British Columbia, population 12,000, is now on a path to arguably become the biggest threat to the Puget Sound economy.

"We're quite happy," said Port of Prince Rupert CEO Don Krusel, who describes his town and port as a "real success story."

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D'Avignon says labor relations have strengthened Rupert's position as well. 

"We've also had a high degree of labor peace in B.C. over the last 8-9 years, which again is another component of capital coming into the marketplace to make an investment," he said.

Krusel says it's amusing to think, in his words, that anyone in Seattle and Tacoma would view tiny Rupert as a threat.

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The Independent: British Columbia’s economy is booming — for the most part

British Columbia’s economy is booming — for the most part. That was the consensus at ICBA’s second annual Industry Outlook event, which brought together industry experts for a morning of insight and forecasts for B.C.’s construction sector and related industries. 

Industry Outlook provides a snapshot of the entire economic picture of British Columbia and what work will be available where. The continued decline in commodity prices is affecting numerous B.C. industries and the short-term economic prospects for the province are mixed.

Panelists included Ken Peacock, Chief Economist and Vice President for the Business Council of B.C. Peacock says that 2016 has started inauspiciously, with global economic forecasts trending downwards. However, U.S. employment and housing starts are climbing, which is good news for the forest sector in B.C., he says.

Peacock says he is pessimistic short term but optimistic long term. Although the B.C. job market has picked up, the growth has been in the Lower Mainland. B.C. is still poised to lead the country in economic growth.

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Journal of Commerce: ICBA conference takes broad look at B.C. economy

British Columbia's economy is booming — for the most part. That was the consensus as the Independent Contractors and Businesses Association (ICBA) held its second annual Industry Outlook event on April 28 in Burnaby, B.C., with a panel of experts from a wide swath of construction-related industries on hand to talk about the present and future of the province's economy.

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Globally the economy is also trending downwards, with the United States one of the few areas of stability, said Ken Peacock, chief economist with the Business Council of British Columbia.

"We are in a weird, weird world of low interest rates," Peacock said, which creates distortions such as overinvestment in housing.

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"Surrey will add rapid transit and that will have a massive impact, because they have a huge amount of vacant land to build on," Peacock said.

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Nanaimo News Bulletin: Business Council says province needs to better compete in world economy

B.C. has Canada's most diversified economy with retail sales growth outstripping every province in 2015, but the province will have to up its game to ensure its place as a player in an increasingly competitive world economy.

It's the message Greg D'Avignon, president and CEO of the Business Council of B.C.,  delivered at the Greater Nanaimo Chamber of Commerce's annual general meeting and membership luncheon, hosted at the Vancouver Island Conference Centre Wednesday.

The Business Council of B.C. is the province's main policy and business advocacy organization, which represents the leading businesses in B.C.'s main economic sectors. The business council is conducting workshops across the province, including Nanaimo Wednesday, as part of BC2035: Imagine B.C.'s Future, an eight-month project to discuss ideas with businesses, educational institutions and community partners to develop a 20-year road map for the B.C. economy.

D'Avignon discussed the five forces, such as shifting demographics, rapidly advancing technologies, global connectivity and emerging markets, urbanization and climate, currently changing the world at an unprecedented rate. He said B.C. needs to prepare for those to stay competitive over the coming 20 years.

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Global News BC: Softwood lumber deal discussed at forest industry convention in Kelowna

Forest products are big business in B.C. The sector contributes more than $12 billion to the GDP of British Columbia and employs 145,000 people in the province directly or indirectly.

“Government and industry have a shared interest in making sure the industry remains competitive,” says Susan Yurkovitch, president and CEO of the Council of Forest Industries.

Hundreds of stakeholders from all over B.C. are in Kelowna for the Council of Forest Industries convention, including industry CEOs, customer representatives and politicians.

One hot topic being discussed is the need for Canada to hammer out a new softwood trade agreement with the U.S.

The original softwood lumber agreement was signed in 2006 after years of dispute. It expired in 2015 and Canada has six months to get a new deal in place before the U.S. can launch any trade action.

“Whether the Americans will play ball, I don’t know,” says Jock Finlayson, executive vice-president of the Business Council of B.C. “So it’s another challenge the industry is facing. The threat of penalty tariffs for selling into the U.S. which currently don’t exist.”

B.C. Forests Minister Steve Thomson says one positive note is Prime Minister Justin Trudeau and U.S. President Barack Obama have instructed negotiators to “intensively explore all options” and report back to them within 100 days.

“So we see that as encouraging but we’re not naïve to the fact that it’s a very complex set of negotiations,” says Thomson.

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CKNW: Strength in diversity: BC’s Job Market Outlook

The reports are usually optimistic.

In recent years B.C. has performed better than other provinces, economically speaking.

But what about the future?

As young British Columbians make decisions about their future, and what sectors should they be looking to?

Strength in diversity

B.C.’s economic success as of late is not a fluke.

Canada’s economy, as a whole, has been hurting, largely due to tumbling oil prices.

It’s having a harsh impact on our neighbour Alberta.
 

But Jock Finlayson with the Business Council of BC says this province is not having that problem.

“We have a very diversified industrial base here, we don’t produce very much oil, in particular. We seem to be holding up well at a time when our economy, nationally, is growing at 1% a year, we’re probably closer to 2.5 or even 3% a year, so that’s pretty good. We are leading Canada in job growth in 2015, and we think that will continue to be the case in 2016 as well.”

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What’s next

So, what about the future?

What sectors are expected to be hiring in the years to come?

Finlayson says a key source of jobs is NOT going to come from economic growth, but actually from replacements for people leaving the workforce, especially for retirement.

“We are in a period where the front end of the baby boom generation has started to retire in growing numbers. Some older workers are remaining in the workforce, but most when they hit 62, 63, or 64 do retire — at least from full-time work. So, that is creating more vacancies, and we expect that will accelerate over the next two years. Probably two-thirds of all the jobs openings for people in British Columbia over the next ten years will be replacement positions.”

 And what areas will see the most retirements?

Finlayson says the public sector workforce is older than the private sector, and that means job openings in government administration, police, fire, and post-secondary education.

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iNews880AM: Strength in diversity: BC’s Job Market Outlook

The reports are usually optimistic.

In recent years B.C. has performed better than other provinces, economically speaking.

But what about the future?

As young British Columbians make decisions about their future, and what sectors should they be looking to?

Strength in diversity

B.C.’s economic success as of late is not a fluke.

Canada’s economy, as a whole, has been hurting, largely due to tumbling oil prices.

It’s having a harsh impact on our neighbour Alberta.
 

But Jock Finlayson with the Business Council of BC says this province is not having that problem.

“We have a very diversified industrial base here, we don’t produce very much oil, in particular. We seem to be holding up well at a time when our economy, nationally, is growing at 1% a year, we’re probably closer to 2.5 or even 3% a year, so that’s pretty good. We are leading Canada in job growth in 2015, and we think that will continue to be the case in 2016 as well.”

 ...

What’s next

So, what about the future?

What sectors are expected to be hiring in the years to come?

Finlayson says a key source of jobs is NOT going to come from economic growth, but actually from replacements for people leaving the workforce, especially for retirement.

“We are in a period where the front end of the baby boom generation has started to retire in growing numbers. Some older workers are remaining in the workforce, but most when they hit 62, 63, or 64 do retire — at least from full-time work. So, that is creating more vacancies, and we expect that will accelerate over the next two years. Probably two-thirds of all the jobs openings for people in British Columbia over the next ten years will be replacement positions.”

 And what areas will see the most retirements?

Finlayson says the public sector workforce is older than the private sector, and that means job openings in government administration, police, fire, and post-secondary education.

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The Globe and Mail: B.C. businesses call on Clark to lift carbon tax freeze

A group of British Columbia’s green businesses wants Premier Christy Clark to lift the freeze on the carbon tax and return to annual increases, but an organization representing some of the province’s top employers says the tax is high enough.

More than 130 businesses have signed a letter urging Clark to lift her government’s four-year freeze on the carbon tax at $30 per tonne and introduce annual increases of $10 per tonne, starting in July 2018.

The open letter comes in the final days of a provincewide climate consultation process aimed at setting government goals to cut greenhouse gas emissions and boost the green economy.

“Close to one-third of B.C.’s carbon pollution is under the direct control of the province’s 170,000 small and medium-sized businesses, which employ more than one million people,” says the letter, which was initiated by the Board of Change, Clean Energy BC, Climate Smart Businesses Inc., the Pembina Institute and Clean Energy Canada. “We are part of the solution when we work in energy efficient buildings, drive cleaner vehicles and reduce waste.”

But Jock Finlayson, head of policy for the Business Council of British Columbia, said Wednesday the province is already ahead of most jurisdictions.

“We don’t favour a unilateral move by B.C. to further increase the carbon tax,” he said. “We’re already head and shoulders above anybody else in North America. We don’t think it will actually be good for the economy to further widen the gap between carbon prices in B.C. and other jurisdictions.”

Environment Minister Mary Polak said the carbon tax has proven to be effective at fighting pollution, but the government needs to examine the impact of raising the tax above $30 per tonne.

“We know it works, but what happens when it goes higher?” she said. “What does it do to our economy?”

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CKNW: Mixed opinions on carbon tax in business community

An open letter from some businesses calling on Premier Christy Clark to up the carbon tax isn’t going down too well with other business groups.

That letter by more than 130 businesses calls on the premier to thaw-out its freeze on the thirty dollar a tonne rate

But Executive Vice President of The Business Council of British Columbia Jock Finlayson says that doesn’t reflect the opinion of the mainstream business community.

“The main industry association, the BC Chamber of commerce, and a variety of others do not subscribe to that particular viewpoint. But I do respect the fact that there’s a mix of opinions out there, including in the business world, on some of these topics including the carbon tax.”

Finlayson says his organisation would rather see a national strategy.

“We need to be working collaboratively with other jurisdictions rather than continuing with this somewhat myopic made-in-BC approach to climate policy that I think was reflected in the letter that was released today.”

The letter says the tax should rise in 2018 with ten dollars added every year after that.

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The Cap Times: Plain Talk: Take heed of neighbors to the north on carbon tax

Those crafty Canadians.

First they figure out a way to give every citizen complete health care coverage from birth to death and now they're sprinting in front of us in the battle to reduce carbon emissions that are contributing to climate change.

British Columbia has had a carbon tax since 2008. Initially, the tax was$10 per ton on carbon dioxide equivalent; it rose yearly till it reached $30 per ton in 2012. Interestingly, the tax was proposed and pushed not by a horde of liberal politicians but by the conservative British Columbia Liberal Party. It has caused about a 20-cent hike in the cost of a gallon of gas and was not very popular at first, but now British Columbians are singing its praises — including big business interests that were sure the tax would cause untold disaster.

According to an account in The New York Times earlier this month, British Columbia's economy didn't collapse as some predicted, but actually the province's economy grew faster than its neighbors' even as its greenhouse gas emissions declined.

"We were not very happy when it was first announced," said Jock Finlayson, head of policy at the Business Council of British Columbia. Now, "within the business community there is a sizable constituency saying this is OK."

When the tax was enacted, polls showed that 47 percent of BC's residents disapproved. Today that number has fallen to 32 percent.

Many American energy experts predict the same could happen here. A properly calibrated carbon price in the United States, MIT professor Christopher Knittle told The New York Times, could replace all the climate-related regulations business hates so much, including renewable fuel mandates and President Obama's much vilified Clean Power Plan. 

The carbon tax gives business and citizens an incentive to rely more on alternative energy sources. British Columbian businesses, for instance, have reduced carbon emissions from 5 to 15 percent since the tax was enacted.

Like similar proposals that have been made in the U.S., proceeds from the tax are returned to families and businesses through a variety of tax breaks each year.

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Vancouver Sun, Barbara Yaffe: Liberals’ deficit budget good news for Conservatives

The federal budget earlier this week blew kisses to Lower Mainland mayors, disappointed B.C. business groups and provided a political Viagra pill to the Conservatives.

Everyone knows the Canadian economy is sluggish, oil prices are down and interest rates are low. So, deficit spending may well be in order. Certainly, the mayors are welcoming all the new affordable housing and infrastructure spending.

Business groups are less enthused. The Business Council of B.C. tepidly acknowledged the budget is “appropriate for today’s challenging economic times.” And the B.C. Chamber of Commerce said it “welcomes some strategic investments in the new federal budget.”

But both business organizations added big caveats. They expressed concern that the Liberals have failed to prioritize a return to balanced budgets.

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It will be deeply troubling to many that Finance Minister Bill Morneau’s first budget has forecast a 2016-2017 deficit three times that promised during the Liberal campaign last fall. And, notwithstanding a former promise of a balanced budget by the end of the mandate, a $17.7-billion deficit has been forecast for 2019.

This in itself tells a story of how quickly debts and deficits can spiral out of control.

All of which accords a terrific political opportunity for the Conservatives, who have been looking entirely irrelevant since Stephen Harper lost the top job and went into virtual hiding.

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BC Local News: Big federal deficit not alarming to Business Council of B.C.'s Finlayson

Critics are worrying too much about the federal government's large projected budget deficit of nearly $30 billion this year, according to a spokesman for the Business Council of British Columbia.

Executive vice-president Jock Finlayson said aggressive stimulus spending is justified given the "feeble" national economy, particularly in oil- and commodity-producing areas, even if that seems out of step with what's needed in B.C.

"I don't find the fact that they're going to be running a sizable deficit for the next year or two particularly alarming on its own," he said.

Finlayson noted $30 billion is equivalent to only 1.5 per cent of Canada's overall economy, measured by its GDP (gross domestic product).

"As long as economic growth is 1.5 or two per cent we'll actually see the debt-to-GDP ratio remain stable (at around 31 per cent) or even inch down a bit," he said.

The U.S. and U.K. are running much larger budget deficits as a share of their economies, he added.

Finlayson is less enamoured of the federal projections for continued big deficits stretching out five years, adding he'd like to see Ottawa wrestle them down towards a balanced budget sooner.

Otherwise, he said, the federal Liberals could be surprised by other economic trouble, such as a recession in the U.S. or a faster-than-expected climb in interest rates.

"If those kinds of scenarios unfolded then we could end up stuck with chronic deficits at the federal level rather than shrinking deficits."

The federal strategy is geared to address the sharp downturn that accompanied the collapse of oil and other commodity markets in other provinces.

That's translated into not just greatly reduced spending by oil and gas companies, but also pipeline, engineering and environmental services companies that do associated work, along with waves of layoffs and rising unemployment.

"This epic downturn in commodity markets is reverberating through a lot of different industries that are part of the resource supply chain."

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