Bob Price looks back at the year that was in BC business and industry
In many way, the last 12 months were really no different than most: a year of highs and lows and everything in between for the B.C. business world. Yes, it could have been better, but it also could have been worse.
Without question, the most impactful economic news came in early October, when LNG Canada announced plans to forge ahead with the single largest private sector investment in Canadian history.
Virtually overnight, the normally sleepy community of Kitimat was transformed into Canada’s next energy boomtown, with the joint venture valued at $40 billion involving Royal Dutch Shell, Malaysia’s Petronas, PetroChina, Korea Gas Corporation and Japan’s Mitsubishi expected to create a large-scale LNG export terminal by 2024.
That said, there is still a sense of unease in the business community as the year draws to a close.
“I don’t think the business mood is very buoyant at the moment, certainly not around our table,” says B.C. Business Council Vice President and Chief Policy Officer, Jock Finlayson.
“People are nervous. There is concern about government policy, both provincially and with what is going on in Ottawa along with overall global growth.”
Growing fears related to international trade have also caught the attention of Helmut Pastrick, Chief Economist of Central 1 Credit Union.
Pastrick contends that while 2017 was a “pretty good year,” there are headwinds ahead as a result of protectionist policies of U.S. President Donald Trump. A simmering trade war between China and the U.S. would also have a huge impact on British Columbia.
Pastrick expects the province’s economic growth to finish 2018 around 3% – down substantially from 3.8% in 2017.
While most economists agree that the massive LNG project at Kitimat was 2018’s most positive economic news, they also generally concur on the most negative: the downturn in the overall housing market.
“Government policy undoubtedly played the key role,” says Finlayson, who contends the Horgan government’s controversial speculation tax cooled the market while having little impact on affordability.
“Without question, we’ve seen a substantial pullback,” says Cameron Muir, Chief Economist of the B.C. Real Estate Association.
“Government action won’t ever fix affordability,” adds Muir, who describes the NDP’s speculation tax as a “paper tiger.”
Muir notes that in the Metro Vancouver region especially, the central problem facing affordability is the inability of builders to supply the market, stymied by a lengthy list of regulations causing much-needed condominium projects to take up to six years. In 2019, predicted mortgage rate increases will only make the situation worse.
Things are much the same in forestry.
“We’re certain that it’s going to be uncertain,” says lumber analyst Russ Taylor, pointing to wild price swings over the last year to underscore the nervousness felt by sawmill workers across the province.
Taylor notes that while baseline lumber prices rocketed to a record high of $660 in June, the second half of 2018 saw prices plummet. Market conditions for 2019 are currently unclear for several reasons, including U.S.-China trade relations.
One thing is clear: dwindling timber supplies will soon result in more mill closures, adding to the 26 mills idled since 2006. Taylor believes over 700 lumber industry jobs will disappear over the next 3 to 5 years.
Of course, no economic analysis of B.C. is complete without a word on mining and tourism. Tourism Industry Association of B.C. CEO Walt Judas describes 2018 as “Overall good but with some challenges.”
Yet again this year, the tourism sector felt the wrath of wildfires, although by most accounts, the impact wasn’t quite as widespread as 2017.
2018 tourism revenues are still being tabulated, but Judas expects growth in the 2% to 4% range. And with annual B.C. tourism-related revenue nearing $18 billion, the industry awaits a new government tourism strategy in early 2019. Convinced B.C.’s overall tourism outlook is bullish, Judas remains cautious, noting his business faces several wildcards, such as geopolitical concerns with China.
The B.C. mining industry will enter the new year hopeful that uncertainties surrounding commodities will steadily fade – and they may be right. Several analysts anticipate higher gold and copper prices. Changing technology increases demand for metals such as copper. As things like electric vehicles and wind turbines become increasingly prevalent, B.C. is in a strong position to supply that metal to the world.
Nearly all economists agree: B.C.’s economy is largely driven by consumer spending. For a myriad of reasons, that spending appears to be slowing – significantly. There are worrisome signals within the business community, not least of which is a cautious hiring climate, with public sector hiring up and private sector job creation down.
It’s also widely accepted that British Columbia’s uncertain political climate has caused economic jitters with some speculating about the possibility of a spring election.
Should auld acquaintance be forgot, and never brought to mind?
Happy uncertain New Year!
As always, I encourage your feedback on twitter: @kammornanchor
Bob Price is a veteran B.C. broadcaster who anchored the morning news on CHNL radio in Kamloops for the past 30 years. Bob is also a past Webster Award winner whose previous stops included Vancouver and Calgary.