B.C. Business Matters:
Ken Peacock >>
BC Tops the Provinces in Economic Growth in 2015
By Ken Peacock
Bolstered by the lower dollar, inward migration, and a hot housing market, BC’s economy grew by a solid 3.0% (after adjusting for inflation) in 2015. This was the strongest expansion since 2006, although just slightly above 2014’s healthy 2.9% gain.
BC also recorded the fastest growth of any province. Ontario was second, with a respectable 2.5% gain in real GDP last year. Manitoba’s economy grew by 2.3%. After that, growth patterns were very divergent. Plummeting oil prices hit the oil producing provinces hard. Alberta’s economy contracted by a painful 4.0%, Newfoundland’s by 2.2%, and Saskatchewan’s by 1.4%.
2015 Real GDP Growth by Province, %
Source: Statistics Canada.
Last year’s impressive economic performance for BC was driven by growth in the services sector (3.8%), while real GDP in the goods industries collectively edged up by just 0.5%. The province’s exuberant housing market led to big gains in output in offices of real estate agents and brokers/lessors of real estate. Banking and related services also saw growth in excess of 5%. With gains across all store types, output in BC’s retail trade sector jumped by 6.3%. Tourism related industries, such as accommodation and food services and arts, entertainment and recreation, also advanced. Transportation and warehousing services output expanded by 5%.
Within the goods sector, the picture was mixed. Output in the residential construction industry surged 8.8%, with non-residential building construction also contributing to growth (expanding by 3.8%). Engineering construction, however, dropped 11%, as a result of large declines in oil and gas engineering and other engineering construction, as new projects were scaled back or delayed. The completion of Rio Tinto’s smelter modernization project was also a significant factor in the decline.
The weak global commodity price environment and falling export demand resulted in a substantial drop in mining GDP and a decrease in support activities for mining and oil and gas extraction. In contrast, in real terms, output in the natural gas extraction industry actually rose 4.0%. The weaker loonie supported export growth in BC’s manufacturing sector, which grew by 2.5%, with gains in food and beverage products, wood products, chemicals, and furniture partly offset by losses in fabricated metals, transportation equipment and electrical equipment.
Overall, this is impressive growth for the BC economy, especially considering the still soft global backdrop. It is also noteworthy that last year’s solid growth follows a similar expansion in 2014. The industry GDP data released by Statistics Canada provide further support for the Business Council’s contention that BC is benefitting from a diverse industrial base, healthy consumer sentiment and a very robust housing market. The Business Council is projecting economic growth of 2.8% for 2016. But in light of 2015’s performance, we may be revising our 2016 outlook upwards.