In its latest economic outlook, Central 1 also forecasts a shift toward services spending by consumers and tourists, along with more business investment
B.C.’s red-hot housing market may be about to cool, but there’s good reason for optimism about the provincial economy. Central 1 Economics makes that case in its new economic outlook for 2022-24.
“Heading into year three of the pandemic, British Columbia remains in a relatively solid economic position, having weathered much of the challenges better than its provincial peers,” the report states. “We project that the economy expanded by 5 percent in 2021 after contracting 3.8 percent in 2020, while employment growth averaged 6.6 percent. Momentum carries into 2022 with forecast growth of 3.9 percent with ongoing rotation toward services-oriented demand from domestic consumers and tourists, and higher business investment. Housing is forecast to drag on growth following last year’s surge.”
The highlights of Central 1’s latest outlook:
• After expanding 3.9 percent this year, the provincial economy will slow in 2023 and 2024
• Higher commodity prices and inflation continue to boost nominal gross domestic product, but the trend slows
• Economic growth rotates toward services spending while capital investment remains supportive in 2022-24
• The housing market’s contribution to the B.C. economy turns negative after a blockbuster 2021
• The unemployment rate will slide below 5 percent, with population growth providing some cushion
• Risks persist, given COVID-19 variants and central bank rate hikes
One sign of the province’s economic momentum is a sixth straight monthly rise in employment for January, which contrasts with job losses elsewhere in the country, Central 1 notes.
“Although part-time employment has led growth, broadly, B.C. employment has climbed 2.4 percent above pre-pandemic levels and is tops for the recovery phase. This has intensified labour market shortages, and indeed the province may have already reached full employment with an unemployment rate at 5.1 percent, and near full recoveries in both the employment rate and participation rate.”
As the forecast points out, sectors connected to the knowledge economy and the housing market are thriving. For example, employment in the tech sector and professional services has grown 10 percent during the pandemic.
“Labour market indicators are well aligned with other key economic indicators, although the recovery continues to be uneven,” Central 1 says. “Some sectors have emerged unscathed or thrived over the past two years, while others remain demand constrained, ebbing and flowing with provincial and federal health restrictions and global tourism activity.”
Since the pandemic started, B.C. home values have surged almost 40 percent, Central 1 observes. New construction, renovations and transaction fees have boosted the economy as housing demand rises in smaller urban areas.
However, Central 1 forecasts that residential property will lose steam later this year. “While housing construction remains elevated, new construction falls back. Affordability erosion and higher interest rates are expected to drag housing transactions lower by 10 to 15 percent. Prices will likely track higher into the spring, but the rapid gains and frothiness increases the likelihood of a climbdown of up to 10 percent as rates rise and inventory moves up.”
Central 1 also expects some key themes from last year to persist in 2022 and 2023. “Consumer demand deceleratesbut remains elevated at 4.0 percent this year and 3.0 percent next year, buoyed by a rotation toward services while population growth accelerates sharply,” it says. “Inflationary pressures are a dampening factor. This will contribute to stronger recoveries in hospitality and other hard-hit sectors. This rotation is also evident in exports as tourism sectors will continue to recover from pandemic declines, although full recoveries could take until partway through 2023.”
Non-residential investment will grow through next year as business investment firms and major projects build out, Central 1 projects. “Commodity markets also buoy private investment,” the report says. “The provincial government is likely to experience a rosier revenue outlook given broad strength in the economy, incomes and royalties. A solid fiscal picture suggests room for the government to remain vested in elevated capital spending on health care, education and climate-proofing B.C.’s public infrastructure. A bigger question mark for the economy comes partway through 2024 and in the second half of the decade when major capital energy projects roll off without any clear investments to take their place.”
Of course, such forecasts have their limits, Central 1 stresses. “Undoubtedly as was the case through the pandemic, outlooks are fraught with risk,” the report concludes. “We are assuming no new variants upend the economy or are generally mild. Other risk factors include central banks that may be too enthusiastic in hiking rates as transitory factors roll off, slowing an economy more than required.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
