VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 01/17/13 -- Real GDP in B.C. is likely to grow 2.2 per cent this year, according to the Provincial Monitor report released today by BMO Economics. However, a few headwinds are keeping growth in check, such as a slowing domestic housing market and weaker Asian export demand, though a resurgent U.S. housing market will likely support exports in 2013.
"B.C.'s labour market is performing decently, with employment up 1.7 per cent in 2012 and the unemployment rate ending the year at 6.5 per cent," said Robert Kavcic, Senior Economist, BMO Capital Markets. "While construction employment has fallen in the past year, reflecting a softer residential sector and a post-stimulus spending lull, resources and financial services have posted solid growth."
Mr. Kavcic noted that the post-recession surge in housing market activity has morphed into a correction, particularly in Vancouver and Victoria. "Prices in Vancouver were 2.3 per cent below year-ago levels in December and down almost 6 per cent since their peak in May, before mortgage rules were tightened further. Falling prices come amid weaker demand and ample supply-province-wide existing home sales are running about 25 per cent below the 10-year trend and active listings are at the highest levels since the recession. With continued weakening expected in the housing market, construction activity is expected to soften in 2013."
B.C.'s economy is being affected by growth in China slowing to a 7.4 per cent year-over-year pace in Q3 and the U.S. economy struggling to churn out growth of more than 2 per cent. "Exports were down 2 per cent year-over-year through October," stated Mr. Kavcic. "However, a strengthening recovery in the housing market should lift U.S. economic growth above 3 per cent in the second half of the year, supporting forestry and consumer-related exports, while growth in China looks to have bottomed."
"Our commercial customers remain optimistic about their business prospects," said Dean Kirkham, Vice President, Commercial Banking, Greater Vancouver, BMO Bank of Montreal. "Manufacturers in particular, who made the decision to upgrade their infrastructure and retool their processes, are beginning to see a lift from those strategic investments. Our BMO Confidence Report shows the majority of B.C. entrepreneurs are confident and expect their business to grow this year."
The Province of British Columbia is projecting a $1.5 billion deficit (about 0.7 per cent of GDP) in fiscal 2012-2013, larger than the $968 million shortfall expected in the budget. Revenue is now $579 million lower than the budget plan, while total spending is $87 billion higher. The Province still aims to balance the budget next fiscal year, in part thanks to savings in government operations and salary and hiring freezes for non-union public-sector employees.
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.
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