Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: And now the bad news about B.C.’s economy

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

In a Black Press Media column posted last month, I touched on a number of factors that continue to support economic growth in B.C., of which the most important is a steadily expanding population.

Now, I turn to developments that are dampening growth and casting something of a cloud over the province’s economic prospects in the next six to 12 months.

The first negative trend is sluggish consumer spending. Retail sales in B.C. were in negative territory through the first seven months of 2019. Adjusted for inflation and population growth, retail sales are even weaker.

Consumer spending is being weighed down by softer housing markets and the steep drop in auto sales. Record high levels of household debt are also causing some consumers to cut back on spending.

READ MORE: Canadians’ debt levels hit record highs at end of last year, CMHC says

Turning to housing and real estate indicators, residential home sales have fallen markedly in the last year or so. Recently, however, lower interest rates and earlier price declines have improved affordability, with home sales moving higher.

Some market watchers believe the housing down-cycle is over. But the Ministry of Finance estimates that residential sales in 2019 will hover near 46,000, down from almost 74,000 two years ago.

At the same time, housing starts, which have been fairly strong so far this year, are poised to slump, in line with reduced demand from non-resident buyers and decisions by many B.C. developers to pull back from planned projects.

The provincial government predicts that housing starts will drop by more than one-fifth in 2020.

Dwindling residential investment will detract from aggregate economic growth. It will also work against the policy objective of enhanced affordability, which – among other things – requires an increased supply of new housing units.

KEEP READING: Slow home sales cool B.C. government revenues this year

The deteriorating global economy is another major worry. Slower growth in major external markets, including the U.S., China and Germany, is already beginning to pinch B.C.’s exports.

Through July, the value of provincial exports was down by three per cent from 2018 levels. The forest industry has suffered the biggest blow, with wood product exports sagging by around 20 per cent. There is little chance of a meaningful export recovery in 2020.

The rolling economic crisis in the forest sector is another significant negative in B.C.’s economic picture. Mills are closing and jobs are being lost across the province. Forestry provides one-third of B.C.’s merchandise exports.

The number one issue in forestry is the diminished supply of timber, which is pushing up fibre costs for B.C. sawmills even as North American lumber prices remain low. Higher log costs have led to increased stumpage levies, at a time when the industry cannot absorb rising government-imposed charges.

Logging and lumber companies are also struggling with complex First Nations issues and growing environmental and regulatory costs.

The footprint of the forest sector is set to contract as the industry consolidates in the face of a reduced timber supply. Unfortunately, provincial policies and the lack of attention being given to the long-term commercial heath of B.C.’s leading export industry is making the transition harder and more painful than necessary.

ALSO READ: Truck convoy stalls downtown Vancouver traffic to protest forestry job losses

Finally, B.C.’s (and Canada’s) waning overall competitiveness is another economic headwind, one that is especially evident in the natural resource and infrastructure industries and in key segments of manufacturing.

Many companies in these sectors are postponing capital investments and/or investing elsewhere. Rising taxes on business are part of the explanation, along with complex and increasingly costly government regulatory regimes that are making Canada and B.C. less attractive places to deploy capital.

READ PART 1: A mix of good and bad news about B.C.’s economy

Add it all up, and the Business Council has decided to mark down our B.C. economic outlook for 2019-20.

We now expect growth of less than two per cent this year, rising slightly in 2020 as work accelerates on LNG Canada’s huge natural gas liquefaction plant and related marine terminal in Kitimat.

Job creation should continue, but at a noticeably slower pace than in the recent past. Government policy-makers and business decision-makers should get ready for a bumpy economic ride.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

Just Posted

Shawnigan Hills parkrun report for Nov. 30

Seven personal bests set in chilly conditions

VIDEO: Celebrate magic of the holidays as Winter Harp returns to Cowichan Sunday

Wonderful Winter Harp is back at the Cowichan Performing Arts Centre on… Continue reading

VIMC will not proceed with controversial construction plans; going to legal action

North Cowichan says Monday’s public hearing will go ahead anyway

Duncan Christmas Kick-Off a hit

The City of Duncan lit up for the season with their annual… Continue reading

‘Things haven’t changed enough:’ Ecole Polytechnique anniversary prompts reflection

Fourteen women were fatally shot by a gunman at the Montreal school on Dec. 6, 1989

Bear raids freezer, gorges on Island family’s Christmas baking

Hungry bruin virtually ignored meat and fish, focused, instead, on the sweets

B.C. pharmaceutical company’s stocks double in value after successful lupus drug trial

More than 40 per cent of patients using voclosporin saw improvements in kidney function

Second warning on romaine lettuce from California region as another E. coli case reported

Two cases of E. coli have been reported in relation to the illness in the U.S.

B.C. Transit finds 28 used fareboxes online, saves $300,000

‘Someone joked maybe we can buy used fareboxes on eBay,’ CEO says

Many of Canada’s working poor can’t afford lawyers, don’t qualify for legal aid

One lawyer says many people earn too much to qualify for legal aid, but not enough to really live on

Economy lost 71,200 jobs in November, unemployment rate climbs to 5.9%

Jobless rate is at its highest since August 2018, when it hit 6%

BC Hydro reservoirs see record low rain across Vancouver Island

Hydro electric watersheds are at a third of their normal levels

Most Read