Mid-Year Update: BC Economy Slows in 2013, Rebounds in 2014

Against a subdued global backdrop and fairly soft domestic economic conditions, the near-term growth outlook for BC has been trimmed. We now expect real GDP to increase by a sub-par 1.6% in 2013, which is still a bit better than the BC government’s 1.4% projection in its recently tabled budget. At the start of the year we thought that a mid-year pick up in exports and some additional investment spending would lift the province’s GDP growth rate above the 2% mark. While an improved external economic setting will eventually translate into stronger growth for BC, the timing for this positive turn has been pushed back.

Highlights

• The global economy remains unsettled and exhibited little forward momentum over the first half of 2013. Europe is still mired in recession, growth remains weak in the United States, and China’s economy appears to be losing a step.
• British Columbia’s exports have been resilient, showing modest growth year-to-date despite the sluggish global economy and generally falling commodity prices. BC’s exports of lumber and of natural gas have risen, but this has been largely offset by declines in other export-oriented sectors.
• So far in 2013, the province’s economy has been held back by a subdued job market, weak retail sales, and declining housing market activity. We expect some improvement in these areas by the end of the year and into 2014.
• For 2013, the Business Council now projects that real (inflation-adjusted) gross domestic product in British Columbia will expand by 1.6%, down from 1.9% last year. For 2014 we forecast stronger growth in the range of 2.5%.