Op-Ed: Diversified industry dynamics to drive B.C.’s 2019 economic engine (Business in Vancouver)
As we enter 2019 and consider what lies ahead for the provincial economy, a review of industry dynamics provides comfort as well as a confirmation that the B.C. economy is now growing at a more moderate pace. The comfort comes from the fact that the province’s leading growth sectors span a wide array of industries, providing a degree of resiliency. Confirmation of the downshifting to a slower growth trajectory is supported by evidence that activity in some previously expanding industries has already turned down.
Film and television production topped the B.C. growth charts over the past five years. While it may be difficult to sustain this pace of expansion, the rise of Netflix and other streaming services, coupled with a low Canadian dollar, B.C.’s desirable locational attributes and our highly skilled workforce, should keep this sector marching forward at a healthy clip.
A variety of other service industries are also among B.C.’s leading growth sectors. Many are large and support significant numbers of jobs. The transportation and warehousing sector has posted above-average growth and is anchored by B.C.’s role as Canada’s Asia-Pacific gateway. Tourism has also been an important economic driver, with the air transportation subindustry emerging as a growth leader since 2012. The food services sector has been expanding twice as fast as the overall economy, in part thanks to a boost from tourism spending. (Note that the overall tourism sector is not defined as a distinct industry in the economic accounts.) Professional, scientific and technical services have been another growth leader – not only in B.C., but in Canada as a whole.
An interesting finding is the prevalence of manufacturing among B.C.’s 30 fastest-growing industries. Machinery manufacturing and electrical equipment and appliance manufacturing are examples, along with the manufacturing of architectural and structural metals. Petroleum refining makes it into the top-15 list, as does aluminum production and processing thanks to the jump in output from the revitalized Rio Tinto aluminum smelter in Kitimat.
Many readers will be interested to see that wineries and distilleries are the fifth-fastest-growing industry in the province, while the brewery industry comes in at 14th.
In the advanced technology space, computer system and design services is the ninth-fastest-growing industry in the province. We expect its impressive performance to continue.
The big economic contribution made by natural resources is also apparent in the data on industry output. Note that natural gas holds two places in the top-15 list: investment in the sector (new engineering construction) and the transportation of natural gas. Based on the five-year figure, copper, nickel and lead and zinc ore mining is a top-30 growth industry, although its output shrank in 2017 and its near-term prospects are not promising.
Certain categories of value-added wood products were among B.C.’s 15 fastest-growing industries from 2012 to 2017. Metal processing and production also expanded steadily over the same period (although it was not in the top 15).
Construction has been a high-profile B.C. growth sector for several years. Much of its strength is attributable to the residential construction sub-sector, which ranked seventh in output growth in the last half-decade. However, residential construction has recently lost momentum, and it is likely to drop out of the top growth industries over the next few years.
Non-residential construction is a different story. Construction in the oil and gas sector ranked as B.C.’s third-fastest-expanding industry from 2012 to 2017. Looking ahead, engineering construction related to natural gas should be a prominent growth engine as LNG Canada and related pipeline and upstream gas production projects ramp up.
Economic growth in B.C. moderated over the last year, in part reflecting a decline in activity in some of the province’s leading growth industries – particularly the rotation away from housing investment and real estate sales. Still, the diverse mix of growth industries across the province and the development of a liquefied natural gas sector suggest that B.C. is reasonably well positioned to weather the easing in the global economy that now appears to be unfolding.
Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.
As published by Business in Vancouver.