A slowdown in residential construction investment will be a drag on the B.C. economy over the next year or two, but this will be offset by a boom in non-residential building, according to a forecast released August 16 by Central 1 Credit Union.
Housing starts in the province are currently high, supported by presales in the active markets of the past few years. But this will slow down along with current new home sales, wrote Central 1’s deputy chief economist Bryan Yu.
Yu wrote, “Starts are forecast to dry up. New housing is a lagging indicator of the market and a downshift is anticipated with the cooling of demand. Timing is uncertain particularly given the longer lead time for large, complex multi-family projects. A pull back in momentum in the second half of this year contributes to a four per cent annual decline in starts in 2019, with a decline of 15 per cent in 2020. Residential investment will be an increasing drag on the economy [although] rental construction may pick up some of the slack.”
He said that he expects residential investment spending to decline three per cent in 2020 “after eking out a small increase in 2019” and then it will stay flat through 2021.
However, Yu expressed confidence that non-residential construction growth, especially in major projects, will offset some of these losses to the B.C. economy.
“Rising non-residential construction is … indicative of firm growth. Building permits rose more than 60 per cent through May, with strong gains across private and public sector intentions. Government investments in schools and hospitals have lifted activity, alongside major private sector initiatives including new office space in Vancouver. Adding to this is ongoing engineering work on major projects such as the Site C dam in the Peace region and the liquefied natural gas activity in the northwest.”
Looking further ahead, Yu wrote that major capital projects will be key drivers of B.C. economic activity.
He wrote, “Major capital projects will be key drivers of growth over the coming years. Build out of the LNG Canada liquefied natural gas facility in Kitimat and associated pipelines through to 2023, coupled with ongoing construction of the Site C dam and twinning of the Trans Mountain pipeline will highlight the rising investment cycle. Public works projects including the Patullo Bridge replacement, extension of the subway line in the Vancouver Broadway corridor will also lift construction. These projects [will] drive strong gains in non-residential investment, particularly in engineering and building construction through to 2021 before declining in 2022. As the liquefied natural gas project moves closer to completion, natural gas production and to a lesser extent, natural gas exports, will pick up in 2022 onwards.”
Economic cost of a warmer planet
Earlier this year California-based utility Pacific Gas and Electric (PG&E) became one of the clearest cases of how climate change can wipe out a company that has not done enough to prepare for a warming planet.
After costs related to wildfires ballooned, PG&E filed for bankruptcy protection. The company faced approximately $30bn in liabilities as a result of its role in the 2017 and 2018 fires.
State investigators linked 100 deaths to the fires. Federal judge William Alsup blamed the cause of some of the fires on the utility’s negligence and said the utility had paid $4.5bn to shareholders in dividends over the past five years while failing to take adequate safety precautions.
And now Germany‘s car industry is facing the threat of losing its position as a leading centre for production. A series of missteps – from diesel-cheating scandals to a lack of preparedness for the end of the combustion engine – has left the road open to Uber, Tesla and Chinese electric brands. An industry that employs more than 800,000 people is facing a make-or-break moment.
So, are businesses doing enough to prepare for climate change or do executives have their heads in the sand?
According to a Global Commission on Adaptation report, businesses need to plan more for a warming planet. Companies that do not adapt may not survive.
The report claims investing $1.8 trillion to climate-proof business and the broader economy by 2030 could generate up to $7.1 trillion in net benefits. Half of the world’s biggest companies believe climate adaptation could result in $236bn in increased revenue.
One of the authors of the report is Feike Sijbesma, chief executive of Dutch life sciences company Royal DSM. Economics editor Abid Ali talks to him about climate change adaptation and why it is important for businesses around the world.
Sijbesma points out that no country in the world can escape from climate change.
“Addressing climate change mitigation and addressing climate change adaptation is in the interest of all countries and in the interest of all companies,” Sijbesma says.
“Of course, as companies we are not philanthropic organisations, we need to make money, but there are more interests than only making money and there are more interests than only the short term.”
Source: Al Jazeera News
Peru economic growth jumps due to healthy domestic demand
SANTIAGO — Peru’s economy grew 3.28% in July from the same month a year earlier, the second highest rate this year, due principally to healthy domestic demand and a slight rally in the mining sector, the government said on Sunday.
The rate was in line with analysts’ estimates in a Reuters poll. The Peruvian economy grew 2.74% in the last 12 months to July, the state statistics agency Inei said.
Peru is the world’s No. 2 producer of copper, zinc and silver. (Reporting by Marco Aquino, Writing by Aislinn Laing Editing by Paul Simao)
Slower U.S. job growth expected
By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job growth likely slowed further in August, but the pace of gains probably remains sufficient to keep the economy expanding moderately amid rising threats from trade tensions and weakness overseas that have left financial markets fearing a recession.
The Labor Department’s closely watched monthly employment report on Friday will come in the wake of a survey on Tuesday that showed manufacturing contracting for the first time in three years in August. The economy’s waning fortunes, underscored by an inversion of the U.S. Treasury yield curve, have been largely blamed on the White House’s year-long trade war with China.
Washington and Beijing slapped fresh tariffs on each other on Sunday. While the two economic giants on Thursday agreed to hold high-level talks in early October in Washington, the uncertainty, which has eroded business confidence, lingers.
The economy is also facing headwinds from Britain’s potentially disorderly exit from the European Union, and softening growth in China and the rest of the world.
The Federal Reserve is expected to cut interest rates again this month to keep the longest economic expansion in history, now in its 11th year, on track. The U.S. central bank lowered borrowing costs in July for the first time since 2008.
“The general message from the labor market is that businesses are cutting back on hiring, but they are not laying off workers and that is important,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Consumers are what’s keeping the economy moving at this point.”
Nonfarm payrolls probably increased by 158,000 jobs last month after advancing 164,000 in July, according to a Reuters survey of economists. The anticipated job gains would be below the monthly average of 165,000 over the last seven months, but still above the roughly 100,000 per month needed to keep up with growth in the working age population.
The unemployment rate is forecast unchanged at 3.7% for a third straight month.
August job growth could, however, fall short of expectations because of a seasonal quirk related to students leaving their summer jobs and returning to school. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.
Other factors favoring slower job growth include declines in both the Institute for Supply Management’s manufacturing and services industries employment measures in August. In addition, global outplacement firm Challenger, Gray & Christmas reported a 37.7% jump in planned job cuts by U.S-based employers in August.
But first-time applications for unemployment benefits, a more timely indicator of labor market health, have been hovering near historically low levels. Consumers were very bullish about the labor market in August and the government likely started recruiting for the 2020 Census last month.
Though the trade impasse does not appear to be spilling over to the labor market, job growth has been slowing since mid-2018.
The government last month estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000. The revised payrolls data will be published next February.
The government has also trimmed economic growth for the second quarter. The employment report is expected to show average hourly earnings gaining 0.3% last month, matching July’s rise. But the annual increase in wages is seen dipping to 3.1% from 3.2% in July as last year’s surge falls out of the calculation.
“Recent downward revisions to estimates of economic growth, corporate profits, and employment growth all suggest that the economy is displaying classic late-cycle symptoms,” said Michael Feroli, an economist at JPMorgan in New York. “Moreover, these symptoms are unlikely to go away entirely even if a truce is reached in the current trade tensions.”
The length of the workweek will also be watched for clues on how soon companies might start laying off workers. The average workweek fell to its lowest level in nearly two years in July as manufacturers and other industries cut hours for workers. It is forecast rising to 34.4 hours in August from 34.3 hours in July.
“While one month does not make a trend, hours worked is a leading indicator worth noting,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York. “A prolonged drop in hours worked signals that businesses may reduce hiring, with layoffs and cutbacks in private spending to likely follow.”
Manufacturing employment is expected to have risen by 8,000 jobs last month after increasing 16,000 in July. But factory payrolls could surprise on the downside after the ISM reported on Tuesday that its gauge of factory employment dropped in August to its lowest level since March 2016.
Manufacturing has ironically borne the brunt of the Trump administration’s trade war, which the White House has argued is intended to boost the sector. Factories cut overtime for workers in July.
Government employment could get a lift from hiring for the 2020 decennial census, which could create roughly 40,000 temporary jobs.
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