How is the B.C. economy affected by the headwinds from weaker growth south of the border and an unsettled global trade environment?
In this issue of the B.C. Economic Review and Outlook, authors Ken Peacock and David Williams look at 2019 third quarter results for the B.C. economy and judge the economic outlook to be slipping below what was forecast in the previous quarter.
Consistent with the slowing at the national level, B.C.’s economy is expected to weaken in 2019. We have downgraded our forecast to 1.8% growth outlook for 2019, down from 2% in our 2019 Q2 Outlook.
What is behind B.C.’s further downgraded forecast? Here are four things to take note of:
1. The main reason for the downgrade is the deteriorating external setting. B.C.’s merchandise exports are down more than 5% in the first eight months of 2019, with nearly all our major trading partners seeing a decline. The forest products sector has been hit especially hard. Goods exports are expected to continue to face headwinds into 2020.
2. Consumer spending in the province also remains weak. And there are some signs that the job market is softening, consistent with the steep downturn in the forestry sector and sluggish retail sales.
3. Residential investment is poised to decline in 2020. Although resale activity is picking up, helped by lower mortgage rates, housing starts are cooling.
4. Currently, the main drivers of the B.C. economy are rapid population growth and buoyant non-residential construction spending.
Looking ahead, we believe the time has come for policy-makers to focus more attention on the challenge of building a more productive, innovative and competitive British Columbian economy.