A cooling housing market and a struggling resource sector are expected to hit real GDP growth in BC hard, with the Board predicting the economy will slow significantly in the near term.
“Things have been pretty strong in the province — especially in Vancouver — over the last few years. But, obviously, one of the biggest stories over the last several years has been the housing market in Vancouver which started cooling last year,” says Alan Arcand, associate director at the Conference Board’s Centre for Municipal Studies.
“Even though it has started stabilizing, we think activity in the housing market will be much cooler this year and that leads the slowdown for BC and Vancouver,” he tells NEWS 1130.
“We think things are slowly improving in the resource sector. Commodity prices have been weak but we think they will gradually improve,” Arcand explains. “It’s a cautiously optimistic outlook for the resources market. But obviously the big story is the introduction of the softwood lumber duties.”
The forestry industry has been slapped with US countervailing duties, and the Board points out negotiations with the Trump administration on a new softwood lumber agreement might prove difficult.
After BC’s real GDP growth reached 3.2 percent in 2016, the Conference Board expects the rate to drop to 1.9 per cent this year and 2.3 per cent in 2017 with job growth slowing by more than half, from 3.0 per cent in 2016 to 1.2 per cent this year.
At the municipal level, Metro Vancouver’s outlook is also being dampened by the cooling housing market.
“Last year, Vancouver’s economy was very strong, it grew at 3.8 per cent, and that was the sixth straight year that the Vancouver economy saw growth above 3.0 percent. We think that streak will end this year,” says Arcand.
“We think the economy should expand at a much more moderate pace of 2.4 percent. But, again, that is still one of the fastest growing metro economies in Canada, behind only Toronto.”
The Conference Board report finds slowing housing market activity is affecting two big industries in Vancouver — residential construction and real estate services.
And while Arcand says 2016 was an incredible year for job creation in Vancouver, the rate of employment growth has slowed significantly.
“A record number of jobs was created last year — 61,000 — and that was half of all jobs created in Canada. That pace is unsustainable and we anticipate only about 14,000 new jobs in Vancouver this year.”
However, he believes consumer spending will remain healthy in Metro Vancouver given the labour market remains “pretty healthy.”
The Conference Board predicts Vancouver’s unemployment rate will fall from 5.5 per cent this year to 5.2 per cent in 2018.