B.C. economy in overdrive
Growth through 2010 best in decades, economist says
Fiona Anderson, Vancouver Sun
Published: Friday, January 20, 2006
Increased investment, higher wages and consumer spending will drive the British Columbia economy into the best five years the province has experienced in decades, a Credit Union Central of British Columbia forecast said Thursday.
The province's economy -- as measured by real gross domestic product -- will grow about 20 per cent in the five-year period from 2006 to 2010 compared to only 15 per cent during the five-year period from 2001 to 2005, the report predicted.
"This would be the strongest performance since the 1980s and 1990s," Helmut Pastrick, Credit Union Central's chief economist, said in an interview.
Growth for each of the five years is expected to be between 3.7 per cent and 3.9 per cent, year over year, the report said.
Business and government investment spending, along with personal consumption, would drive the growth, with businesses spending newly earned profits on equipment and machinery as well as building new plants, Pastrick said.
In 2004 company profits before taxes increased 40 per cent and profits are expected to grow an additional 15 per cent in 2005, Pastrick said. That robustness in profits is expected to decline to a still-healthy annual rate of nine per cent, he said.
And when companies profit they typically increase investment, Pastrick said.
"More investment is an important feature of a sound economy," Pastrick said. "Without it we would not grow at the same pace in the long run."
Businesses won't be the only investors as government increases spending on transportation and infrastructure, particularly in the run-up to the 2010 Olympics, Pastrick said.
Consumers will also be adding fuel to the fire by increasing spending as their incomes go up.
The tighter labour market -- with unemployment as low as four per cent -- should spur wages and salaries and increase the number of hours worked, leading to personal income growth of about 6.6 per cent a year, almost double the average growth of 3.5 per cent over the past five years, the report said.
That in turn will increase per capita disposable income by almost three per cent per year, up from less than one per cent during the previous period, the report predicted.
Mining and the oil-patch will see the most growth, Pastrick said, with mining to enjoy 40-per-cent growth over the next five years, as high commodity prices lure investment, Pastrick said. Oil and gas is to also have considerable activity with increased drilling and exploration as prices remain favourable.
Other top-growing sectors will be construction, and retail and wholesale trade, Pastrick said.
The import-export sector will remain the relatively weak link in B.C.'s economy with import growth outpacing the growth in exports, which will widen the province's trade deficit, Pastrick said. Disappointing tourism numbers, affected by the strong Canadian dollar, will contribute to this trade imbalance.
Jock Finlayson, executive vice-president of policy for the Business Council of B.C. said the business council's numbers are pretty similar "assuming there are no nasty surprises on the global scene or south of the border."
Finlayson agreed that mining should be a hot sector provided exploration activity can be converted into new operating mines.
"B.C. is still a very tough place to actually bring forward a new mine proposal and get it through the various regulatory and permitting processes," Finlayson said. "And that's a big problem area for the mining industry,"
Dave Caulfield, president of the Association for Mineral Exploration B.C. said the mining industry needs to find the next generation of mines to keep going and that looks like it might be happening.
It takes about $100 to $200 million of investment to find the next mine, Caulfield said in an interview. And in 2005, the mining industry attracted $220 million.
"So we are getting the level of exploration where we'll start seeing discoveries," he said.
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B.C.'S GROWTH RATE TO ACCELERATE
Growth projections for the province continue to escalate, with a faster pace of growth forecast from now to 2010.
B.C.'s Credit Union Central predicts:
Here are the top two growth sectors for each year to 2010:
2006
Mining*: 13.6%
Other Primary: 10.7%
2007
Construction: 6.3%
Mining: 5.4%
2008
Fishing: 13%
Other Primary: 10.8.%
2009
Other Service: 8%
Mining: 7.2%
2010
Accommodation & Food: 11.1%
Mining: 7.5%
THE FINE PRINT:
Here are the real GDP growth predictions for some of B.C.'s key sectors:
Finance, Insurance,
Real Estate, Leasing 4.2% 4.4% 4% 4.3% 4.3% $36,285**
Manufacturing 2.4% 3.2% 3.6% 2.6% 2.9% $18,350
Retail & Wholesale Trade 4.3% 4.4% 4.1% 3.5% 3.6% $18,241
Health & Welfare Services 3.7% 3.8% 3.7% 3.7% 3.6% $10,391
Transportation & Warehousing 2.6% 3.1% 3.3% 3.1% 4.7% $9,793
Construction 5.7% 6.3% 3.3% 1.9% 0.5% $9,427
Prof., Scientific, Managerial 3.6% 3.9% 3.6% 2.9% 2.8% $9,170
Wood Products 0.8% 1.7% 4% 2.9% 2.4% $5,686
Accommodation & Food 2.9% 3.6% 3.7% 3.7% 11.1% $5,216
Forestry & Logging 2.7% 2.9% 2% 3.1% 2.8% $3,920
Oil and Gas, Mining 2.5% 3.5% 0.7% 0.7% 0.8% $2,249
B.C. total forecast 3.7% 3.9% 3.7% 3.7% 3.8% $158,643
Source: Statistics Canada, CUCBC.
**Millions of dollars indexed to 1997
*Mining: Mining other than oil and gas. Other services: Includes arts and entertainment and recreation. Other Primary: Fishing, hunting and trapping
The Schacter Team - Your Langley Real Estate Experts.