As trusted economists and policy advisors to business and government leaders, the Council relies on sound, evidence-based analysis to inform its policy recommendations. Through diligent tracking of BC’s economic performance, we help identify the opportunities and challenges the province must navigate in order to reach its full potential.
BC's Growth Story Remains Intact...Despite An Uninspiring Global Backdrop
Against the backdrop of diverging growth prospects across the developed and emerging economies and substantial declines in the prices of many commodities, British Columbia is poised for another year of respectable economic performance in 2016.
Canadian Head Office Survey: How Do Metro Vancouver and British Columbia Stack Up?
This issue of Policy Perspectives reviews the recently released Statistics Canada Annual Head Office Survey, comments on its implications for BC/Metro Vancouver, and offers a few thoughts on factors that contribute to a robust head office “ecosystem.”
Commodity Price Slump is Weighing on the Canadian and the Global Economies
The ongoing decline in the US-dollar prices of most internationally traded commodity products has hit the Canadian economy hard, depressing incomes, triggering layoffs and capital spending cutbacks by hundreds of resource companies (and their suppliers), and hurting business and consumer confidence across much of the country.
Jock Finlayson Presentation Peering Through the Gloom: The Longer-Term Outlook for Commodities Presented at the BC Natural Resources Forum, Prince George, January 20, 2016
On January 20, 2016, Jock Finlayson participated in the Invested in Resources - Finances panel moderated by the Honourable Shirley Bond, Minister of Jobs, Tourism and Skills Training at the BC Natural Resource Forum in Prince George. Jock's presentation provides an overview of the current global economic climate and describes how British Columbia is well positioned to benefit from growth in global demand for many natural resource-based products over the next 25 years. Key to this will be government policy that focuses on creating a competitive operating environment to attract investment in resource extraction and upgrading --as well as in related infrastructure development.
D'Avignon & Finlayson: If we don't supply oil, others will (Vancouver Sun)
It is time for a mature conversation on oil exports, against the backdrop of the economic reality we face in Canada and around the world. Simply put, the evidence confirms that all of us will continue to need all forms of energy, including oil, over the coming decades. For Canada, the key question is whether we want to have the option to safely export our oil to global markets other than the United States, currently our only customer, and which pays less than the world market price and requires less of our product each year. In 2013, energy made up one-quarter of Canada’s merchandise exports, of which oil and gas constituted the vast majority. Finding ways to access the world market for our country’s biggest export industry should be a priority for all governments in Canada.
Finlayson & Peacock: Five key economic predictions for 2016 (Business in Vancouver)
It’s the time of the year when business and government decision-makers are tempted to throw caution to the wind and ask economic soothsayers to forecast what lies ahead. Below we take up the challenge, knowing that we may miss the mark in one or two areas but confident that our overall assessment will stand up to scrutiny.
10 things to watch for in 2016
Last December, we compiled a list of ten things to watch for in 2015, with a focus on those expected to impact the provincial economy. This year we are again compiling a list of trends and developments we believe will shape the BC economy in 2016.
Finlayson: Canadian economy will remain sluggish in 2016 (Troy Media)
As the clock ticks down on 2015, it is time to ponder what may lie ahead for Canada’s economy. The near-term picture isn’t particularly heartening. After a disappointing 2015 that included a minor “technical” recession in the first half of the year, Canada looks poised for a somewhat better, but still generally lackluster, performance.
Finlayson Op-Ed: B.C.’ s industrial economy is fading (Vancouver Sun)
Statistics Canada recently reported that B.C.’s economy grew by 3.2 per cent after inflation in 2014, putting B.C. second among the provinces. Gains in residential and commercial construction and a solid advance in consumer spending were the key contributing factors. The job market, however, was surprisingly subdued, with employment rising by less than 1 per cent on a year-over-year basis.
As the clock winds down on 2015, it appears that B.C.’s macro-economy continues to perform fairly well, at least by Canadian standards. Economic growth should end up exceeding 2.5 per cent this year, with strength in retail sales, housing-related activity, tourism, film production, and parts of the advanced technology sector. At a time when Canada’s economy is being pummeled by a deep slump in global oil and metals prices, B.C. is holding its own.
Yet if we look below the surface, the economic picture in the province is less favourable. In particular, what might be described as the “industrial economy” is clearly struggling, with negative implications for business investment and exports.
The “industrial economy” consists of primary resource extraction and related downstream processing in the forestry, mining, and agricultural sectors; the production, transmission and exporting of energy; oil and gas refining, chemical production, and cement/concrete manufacturing; food processing; plastics; non-metallic minerals; metal fabrication; primary metal manufacturing; and beverage manufacturing industries.
Taken together, the industries carry significant weight in our economy. Collectively, they employ almost 200,000 British Columbians, most of whom enjoy wages and benefits that surpass the average. These industries also represent an important source of demand for the outputs of many B.C. service sectors, including transportation, engineering, scientific and technical services, other professional services, environmental consulting, and financial services. Perhaps most strikingly, the enterprises that comprise the industrial economy dominate B.C.’s export base, accounting for around four-fifths of the province’s international exports, year after year.
BC Consumers Are Out Spending
Retail spending in BC continues to grow at a healthy pace. Just released data from Statistics Canada shows retail sales in September were up 6.0% over the same month last year. This is the strongest annual gain among the provinces and stands in sharp contrast to Alberta’s 5.6% drop in retail spending.
British Columbia Since 1995: A Brief Retrospective
As we ponder what British Columbia will look like in 2035 as part of our 50th anniversary programme, it is useful to review how the province’s economy and society have been reshaped over the past two decades, a period of time that has seen the rise of Asia, an expansion of BC’s gateway economy, the development of new and emerging industries, various commodity cycles, changes in the currency, steady inflows of migrants, population aging, and continued urbanization.
What follows is a brief snapshot of a number of significant, high-level economic and demographic trends that have influenced the province since the mid-1990s. But first, to provide a bit of context, we highlight a few features of the political setting and the wider external environment from two decades ago.
Peacock Op-Ed: Canada’s Participation in the Trans-Pacific Partnership is Good for BC (Business in Surrey)
Canada was at the table when negotiations recently concluded for the Trans-Pacific Partnership (TPP) agreement, the largest, most ambitious free trade initiative in history. This is good news for ourprovince. The TPP is a comprehensive trade deal that will help expand and secure access to much of the markets of key Asia-Pacific nations. Although growth in emerging markets has slowed of late, Asia is still projected to comprise two-thirds of the world’s middle class by 2030-35, and will grow to account for upwards of one-half of world GDP within three decades. There will be early benefits from participating in the TPP, but most of the upside will emerge over the medium term.
The TPP currently has 12 participating countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Over time the expectation is that other countries, perhaps including China and South Korea, will also join. Last year, BC exported nearly $23 billion to the other 11 TPP member countries, which accounted for more than 60% of our total merchandise exports.
One reason the TPP is good for BC is it will enhance and deepen these existing trading relationships. Once in force, the agreement will eliminate tariffs on almost all of BC’s key exports and provide secure access to growing economies in the Asia-Pacific. BC will have an advantage over non-TPP countries (notably Europe and Russia) by having duty free access for most of our major merchandise exports, including: wood and other forest products; aluminum, iron and steel products; seafood; agricultural products, and chemicals and plastics. Although global trade has been liberalized and barriers have been steadily lowered over the past few decades, BC’s exports still face sizable tariffs in some TPP markets, ranging from 5% to as much as 40% in a few countries. Japan, BC’s third largest export market, levies tariffs of 6% on some lumber products, 5% on many seafood items and 15% on ice wine. Malaysia has stiff tariffs of 40% on some plywood and panel products. Vietnam also has many punitive tariffs in place.
Finlayson Op-Ed: Memo to Finance Minister Bill Morneau (Troy Media)
Congratulations on your election to the House of Commons as the MP for Toronto Centre and your appointment as Minister of Finance. Business leaders across Canada wish you well as you come to grips with the economic challenges that lie ahead.
One challenge is that Canada appears to have entered a period of sub-par growth. Our economy lost ground over the first half of 2015, largely due to the impact of sharply lower oil prices together with weakness in the markets for many other commodities that form a large part of Canada’s export basket. More recent data signal a pick-up in activity over the summer and into the fall. However, for 2015 as a whole, inflation-adjusted gross domestic product (real GDP) is likely to increase by perhaps 1 per cent, down from an average of 2.2 per cent over 2013-14.
The economy should gain a bit of momentum through 2016, in response to the ongoing expansion in the United States, the low Canadian dollar, and continued accommodative monetary policy. Real GDP is expected to climb by 1.5-2.0 per cent next year. But looking further ahead, Canada also faces stiff economic headwinds from lower-for-longer commodity prices, record high levels of household indebtedness, and weak overall business investment. A slow growth macro-economic environment lends support to your government’s plan to expand infrastructure spending over the next few years. But while spending more on infrastructure is a sound idea, the most convincing reason for doing so is not to boost short-term aggregate demand, but instead to make Canada’s economy more productive and competitive. This includes ensuring that critical infrastructure is in place to enable our resource, manufacturing and tourism industries to connect with and efficiently sell into global markets.
The Myth and Reality of a Clean Economy and Jobs
Clean Energy Canada (CEC) recently released a report which purports to show the BC economy will continue to thrive if the province’s carbon tax is steadily ramped up and a long list of additional regulations and other measures are introduced to further reduce carbon emissions in the province.
The Trans-Pacific Partnership – Positioning Canada and British Columbia for the Pacific Century
The October 5, 2015 announcement that 12 Pacific Rim countries, including Canada, have signed the Trans-Pacific Partnership Agreement (TPP) is good news for British Columbia. Once/if ratified by all of the signatory countries, it will take time for BC businesses to feel the full effects of the deal: elimination of some tariffs will take 10 years or more. Eventually, the global economic potential of the “TPP region” and the new areas covered by the agreement, particularly services and investor and intellectual property protections, could reshape trade flows and boost economic development in what is already the most dynamic region in the world.
Finlayson, Ragan Op-Ed: We need a serious discussion about congestion pricing (Vancouver Sun)
In the past year, public debate in Metro Vancouver has focused heavily on how to pay for new transportation capacity. But there is a critical missing piece in this mobility puzzle. Improved transit services and more investment in roads are needed but they aren’t enough. Experience shows that we can’t just build our way out of gridlock. We won’t solve the problem of traffic congestion without also changing the underlying incentives. That’s why we need a serious discussion about congestion pricing.
This summer’s transit referendum was about how to pay for new transit investments. Its failure doesn’t signal that people are happy being stuck in traffic; nor does it signal that we are using our current infrastructure efficiently. There are several things that pretty much everyone agrees with regarding transportation in Metro Vancouver. First, traffic congestion is extremely costly: time lost in traffic costs people and businesses in the region at least $1.4 billion per year. Second, more and expanded public-transit options are necessary, as are maintenance, repairs and upgrading of existing roads and bridges. Third, those transportation investments somehow will have to be made, for neither businesses nor residents can afford to live without them indefinitely.
Another point of agreement is that traffic congestion is getting worse. Given that Metro Vancouver’s population is projected to grow by about million people over the next 25 years, one can easily imagine how bad things could get. As population and port activities increase, container truck traffic will also grow. Who pays for the time that trucks spend idling on backed-up highways and arterial roads? These time delays raise costs for businesses and increase prices for consumers. We all pay for traffic congestion.
Finlayson Op-Ed: Canada Counting on U.S. Consumer for Economic Growth (Troy Media)
As Justin Trudeau and his euphoric Liberal colleagues get ready to form a new government in Ottawa, they have reason to worry about the macroeconomic picture. But good news south of the border could have a ripple effect in Canada.
In recent weeks, several forecasters, including the Bank of Canada, have (again) downgraded their growth projections for the Canadian economy. This comes amid a deterioration in the international economic outlook, which also continues to disappoint.
It is clear that the world oil price collapse, in tandem with the downturn in many other commodity markets, has hammered Canada’s resource-centric economy. That has triggered a sharp fall in the nation’s terms of trade, and brought on job and capital spending cuts in the energy and mining industries and many of the service sectors that supply them. For most commodity producers, it is hard to see much light at the end of today’s dark tunnel. For Canada as a whole, mustering an annual economic growth rate of even 2 per cent (after inflation) may prove to be a formidable challenge, particularly given that apart from low commodity prices our economy will also be held back by record levels of household indebtedness and stretched housing valuations.
How Canada fares in 2016-17 will hinge, in large part, on developments in the United States. While America has also lost a step at a time of choppy world growth, there is an underlying momentum that should keep its economy on a solid, if unspectacular, expansion trajectory.
Armed with a more competitive exchange rate and a host of domestic industries hungrily looking beyond our own somnolent market for new business, Canada stands to benefit as the giant $18-trillion U.S. economy chugs along.
BC Job Market is Almost Certainly Stronger than Labour Force Survey Suggests
It has been somewhat challenging making sense of BC’s job market over the past couple of years. So far in 2015, Statistics Canada’s Labour Force Survey (LFS) shows overall job growth in the province running at a modest 0.8%, based on year-to-date data through September. Looking just at payroll employment (that is, taking self-employment out of the total job count), the number of employees is up by meagre 0.2% year-to-date, according to the LFS. The difficulty is that this puny increase in the number of employees is not consistent with other economic indicators for BC, such as strong gains in retail spending, a buoyant housing market, and a busy construction sector.
Finlayson Op-Ed: Get ready for the next big boom in U.S. housing (Financial Post)
One of the most striking economic developments in the United States since 2008 has been a pattern of generally depressed household formation. Households are created when young people leave the family nest, when new migrants arrive in a country (or a region), and when couples or roommates split (resulting in two households where one existed before). Deaths, the movement of the elderly into institutional care, population out-migration, and marriage are among the factors that cause the number of households to decline.
Household formation plays a central role in driving the demand for housing and other goods and services tied to the emergence of households – everything from furniture, carpets and cable and internet subscriptions to mortgage appraisals, home renovations, and cleaning and landscaping services.
Federal Election Economic Policy Primer
British Columbians and the rest of the country go to the polls on October 19. In voting, they will help to set the course for the nation’s economy in 2016 and over the rest of the decade. In this pre-election briefing document, we outline some of the BC business community’s priority issues, both for the election itself and for the agenda of the federal government that Canadians will choose on October 19.