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.

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. The province’s economy is being held back by low prices for many commodities, but non-resource merchandise and service exports are kicking into gear, aided by the low Canadian dollar. The housing market remains active, supported by continued rock-bottom interest rates, stronger job creation and inflows of foreign money. The current economic downturn in Alberta means that BC will see a surge in interprovincial migration, which should further bolster housing markets and retail sales in the province.

Highlights

• The outlook for the global economy has been trimmed for 2016, largely reflecting the tempering of activity in emerging markets. Softer growth in China is spilling over to other economies and contributing to a broadly-based slump in commodity prices.
• Even amid conflicting data, the US economy remains on a solid growth footing. But the US outlook has also been notched back due to weakness in manufacturing and the effects of a strong currency.
• Canada’s economy has been hit hard by plunging oil (and other commodity) prices and is in the midst of a protracted adjustment process. The Bank of Canada projects that output (real GDP) will advance by a tepid 1.4% in 2016, little changed from last year.
• Notwithstanding slow global growth and a struggling Canadian economy, BC is holding up surprisingly well. Conditions in the province’s export sector are mixed: commodities are weighing on growth, while service exports and non-resource merchandise shipments are benefiting from the low Canadian dollar and ongoing US expansion. A diversified industrial and export base is helping BC.
• The domestic side of the province’s economy is healthy. Consumer spending is buoyant, aided by a decline in cross-border shopping and continued population growth.
• Housing and residential construction are adding to economic growth in BC, with “offshore” money playing a visible but hard-to-quantify role in supporting prices in some segments of the market.
• BC’s economic growth rate should accelerate to 2.8% in 2016, boosted by consumer spending, housing activity, and a small pick-up in population growth. For 2017, we see growth reaching 3.0%. These projections assume one large LNG project moves forward in BC.