How is the B.C. economy navigating the roughening waters of weak global growth outlook, U.S.-China trade tensions, a Canadian economy that has stalled in per capita terms, and the unwinding of the once-mighty real estate boom across many Asia-Pacific cities? In this issue of the B.C. Economic Review and Outlook, authors Ken Peacock and David Williams look at 2019 second quarter results for the B.C. economy and judge risk to the economic outlook to be on the downside.
Consistent with the slowing at the national level, B.C.’s economy is expected to gear down in 2019. We have downgraded our forecast to 2% growth outlook for 2019, down from 2.2% in our 2019 Q1 Economic Review and Outlook.
What is behind B.C.’s downgraded forecast? Here are the top three things to take note of:
- Absent booming real estate transactions and related consumer spending, which have cooled across many Asia-Pacific cities, the B.C. economy is poised to record three consecutive years of below average growth. In our previous quarterly outlook, we indicated that the growth dynamic within the province would shift to some extent. The slowdown in sectors tied to real estate and residentially-secured credit is expected to weigh disproportionately on the lower mainland while the northern regions of province benefit more from major capital projects. While these factors will still shape regional economic activity, the hit to the province’s resource sectors – particularly forestry – has become a bigger negative factor than we projected back in March, resulting in a more subdued near-term economic outlook for many regions in the province.
- Tourism has also downshifted from a being a growth leader to eking out – at best – very small gains this year.
- Spending in retail stores in B.C. has slowed significantly over the past 18 months as the tailwind from house price inflation – and therefore rising collateral values – disappeared. Retail spending has slowed more in Metro Vancouver than in other regions of the province. The latest figures show retail sales contracting by more than 2% in B.C.’s biggest urban area. In contrast, the rest of the province collectively has seen retail spending expand by roughly 3%.