At a recent breakfast meeting, NAIOP members received an economic update from Bryan Yu, Central 1 Credit Union’s, Deputy Chief Economist. Yu offered a host of statistics reflecting the macro and microeconomic conditions impacting global, provincial and regional growth. In addition to outlining overall economic drag, Yu shared his thoughts on an impending recession while also speaking to some strong economic sectors.
The Global Economy
Stemming largely from the approximately 300-billion dollars imposed on Chinese goods, there is, according to Yu, an overall drag in economic growth. In what’s been described as The U.S.-China Trade War, the tariffs, applied to goods exported from China, ultimately increase the cost for producers, importers, and then ultimately, the consumer. Describing goods and services as synchronous, this drag, described by Yu, is seen not just in goods, but in services too. Though growth is sluggish, the International Monetary Fund (or IMF) suggests global growth will rise from 2.9% in 2019, to 3.3% in 2020.
With a slower growth profile, Yu is often asked his thoughts on an impending U.S. recession. Describing the country’s momentum as slow, Yu doesn’t see evidence of a recession at this time.
The Provincial Economy
Forestry and Mining
Yu spoke of weakness in sectors like forestry and mining. Though rural, Yu suggested, it’s important to note the tight linkage these industries have to the professional services (in places like Vancouver) that support them. With a decline in overall exports, he went on to note a 30% decline in forestry product dollar volume year to date. The forestry revenue decline is multi-faceted resulting from situational factors like declining prices, sawmill production diving, and the long-term impacts of the mountain pine beetle epidemic. The Ministry of Forests, Lands, Natural Resource Operations and Rural Development share that more than 4,000 jobs were lost just this year, with five mills closed and many communities left devastated.
Moving to industries like retail, Yu noted weakness in brick and mortar - only 0.5% growth compared to 9-10% growth in previous years. That being said, Canadian online sales (which have grown 30% year over year) have the potential to further mask the weakness in brick and mortar. Though many weaknesses were illustrated in the provincial economy, Yu shared the strength reflected in B.C.’s tourism, population growth, non-residential construction, and offered positive insights from the labour market.
With a strong labour market, among the lowest unemployment rates in the country (roughly 4%), and the highest jobs vacancy rate (4%), Yu says that if a person needs a job, there’s a good chance they’ll find it in B.C. Wages are increasing, due to a significant shortage of skilled labour. Though many factors point to B.C.’s slowdown, Yu feels wages (what people are earning) and social contribution (what people are paying) are a good “bellwether” signalling strength in consumer demand, leaving B.C. with one of the strongest growth profiles in the country.