BC and Lower Mainland Economic Outlook and Key Trends presented to: - PowerPoint PPT Presentation

BC and Lower Mainland Economic Outlook and Key Trends presented to: Vancouver Real Estate Forum April 19, 2006 Vancouver, BC Jock Finlayson Executive Vice-President Business Council of British Columbia jockf@bcbc.com www.bcbc.com

BC’ ’s Economy is Booming! s Economy is Booming! BC • Economic expansion is broadly-based » most sectors and all regions participating • Domestic economic activity very strong » housing market & consumer spending » non-residential construction and M+E investment » government fiscal stimulus • Export sector more resilient than expected » energy (gas and coal) driving growth » but some other sectors also healthy – wood products, agriculture, machinery & equipment, technology » But…tourism a soft spot, and pulp/paper in crisis

Jobs Are Plentiful Jobs Are Plentiful BC Labour Market Employment Growth Unemployment Rate per cent y/y per cent change 10 4.5 9 25 yr avg. 3.5 8 2.5 7 1.5 6 0.5 5 -0.5 4 02 03 04 05 06 02 03 04 05 06 Source: Statistics Canada, quarterly averages. Latest: Q1 2006

Stronger Job Growth Outside of Lower Stronger Job Growth Outside of Lower Mainland Mainland Employment Growth by Region per cent Lower Mainland 6.8 7 6 Rest of BC 4.5 5 3.5 4 2.6 3 0.9 2 1.6 2.5 1 1.3 0 -1 0.2 -2 -0.9 -2.6 -3 96 97 98 99 00 01 02 03 04 05 Q1 06 Source: BC Stats.

Good Times for Retailers Good Times for Retailers BC Retail Sales, quarterly year-over-year per cent change per cent 12 10 8 6 4 2 0 -2 -4 -6 98 99 00 01 02 03 04 05 Jan. 2006 Source: Statistics Canada.

New Home Construction Picks up Again New Home Construction Picks up Again BC Housing Starts Annual Growth Total Starts, monthly y/y per cent change units 4000 30 3500 20 starts, SA trend 10 3000 0 2500 -10 2000 -20 1500 -30 1000 -40 500 95 97 99 01 03 05 00 01 02 03 04 05 06 Latest: March 2006 Source: CMHC.

And Non- -residential Construction Surging residential Construction Surging And Non Non-residential Building Permits, BC quarterly S.A. millions $ 1000 800 600 400 200 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06* *Q1 2006 estimated based on January and February permits Source: Statistics Canada.

Non- -Residential Structures and Other Residential Structures and Other Non Capital Projects Fuelling Growth Capital Projects Fuelling Growth • Non-residential building permits jumped 55% in 2005, and remain at elevated levels » led by very strong increases in commercial and institutional/government building » smaller increase in industrial permits • Many other large engineering projects underway around the province » Canada Line, Golden Ears Bridge, Sea-to-Sky Highway, Pitt River Bridge, border infrastructure program » William R. Bennett Bridge, Kicking Horse Pass, various power generation and transmission upgrades, Cariboo Connector (Highway 97 improvements) • Gateway program – projects in consultation phase

Energy Lifts BC Exports in 2005 Energy Lifts BC Exports in 2005 BC Merchandise Exports, annual billions $ 35 Total 30 Excl. Energy 25 20 15 10 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Source: BC Stats.

Immigration Up, Net Interprovincial Interprovincial Immigration Up, Net Migration Down Migration Down BC Net Migration, quarterly S.A. thousands 20 Total Interprovincial 15 International 10 5 0 -5 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Latest Q4 2005 Source: BC Stats, Business Council for seasonal adjustment.

US Tourism Market a Soft Spot US Tourism Market a Soft Spot Non-resident Tourists to BC, annual US Tourists to BC Tourists to BC, all millions other countries millions 4.0 1.6 1.4 3.5 1.2 3.0 1.0 2.5 0.8 2.0 0.6 1.5 0.4 93 95 97 99 01 03 05 93 95 97 99 01 03 05 Source: Statistics Canada.

BC Fiscal Track BC Fiscal Track Operating Budget 2000/01 to 2008/09 billions $ 38 8 Revenues* 34 6 Expenditures 30 4 2.575 1.775 1.450 1.503 26 2 0.950 0.550 22 0 deficit / surplus & forecast 18 -2 allowance (right scale) -1.275 -1.187 -2.737 14 -4 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 * Revenues include net earnings of Crown corporations Source: BC Budget and Fiscal Plan 2006/07.

Debt Burden Falling Debt Burden Falling BC Taxpayer Supported Debt Relative to GDP per cent 21.3 22 20.6 20 20.5 Projection in 20.6 18.5 18.2 2005 Budget 18.0 17.3 18 18.2 16 16.4 Projection 15.8 15.7 15.4 in 2006 14 Budget 12 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 Source: BC Budget and Fiscal Plan 2006/07 – 2008/09.

Solid Economic Growth On Tap for BC Solid Economic Growth On Tap for BC Real GDP Growth Average Real GDP Real GDP Growth Growth per cent per cent 4 5 BC Can BC 4 3 3 2 2 Canada 1 1 forecast 0 0 avg. 80s* avg. 90s avg. 00s** 01 02 03 04 05 06 07 Source: Statistics Canada for history; forecasts from BC Economic Forecast * 1982-1989 Council for BC; BMO, CIBC, RBC, Scotiabank and TD for Canada. ** includes 2006 & 07 forecasts

BC Economic Outlook 2006/2007: BC Economic Outlook 2006/2007: Key Risks/Uncertainties Key Risks/Uncertainties • Canadian dollar (a stronger currency is negative for lumber, pulp/paper, agri-food, tourism, film, etc.) • US economy – a number of risks including the trade deficit, a negative savings rate, consumer spending and the housing market • Softwood lumber trade dispute – an “upside surprise” is possible • Oil/natural gas prices – higher prices boost provincial government revenues, but dampen overall growth due to the impact on the global economy and on domestic energy consumers

The Province Faces Some Ongoing The Province Faces Some Ongoing Economic Challenges Economic Challenges • Skill shortages aggravated by a buoyant economy and stiff competition for talent from other jurisdictions • A long period of sub-par productivity gains • Reconciling environmental protection with resource development • Mountain pine beetle (post-2010) • Boosting electricity supply and improving/expanding transmission infrastructure • The “Alberta factor”

Commodities and Construction Helping to Commodities and Construction Helping to Drive Job Growth in Vancouver Drive Job Growth in Vancouver Employment Growth by Industy, Vancouver CMA (annual average 2000-2005) Rental & Leasing Services 11.8 Mining, Oil and Gas Extraction 11.7 Arch., Engineering Services 10.7 Construction 8.9 Educational Serv. excl K-12 8.2 Furniture Mfg. 8 Food, Beverage Mfg. 7.4 Machinery Manufacturing 6.5 Business, Building, Support serv. 6.4 Arts, Entertain., Rec. 5.7 Fabricated Metal Mfg. 5.4 Utilities 4.8 Agriculture 4.5 Food & Beverage Services 3.9 Wholesale Trade 3.8 0 2 4 6 8 10 12 14 per cent Source: Statistics Canada.

Regional Manufacturing Struggling Regional Manufacturing Struggling Employment Growth by Industy, Vancouver CMA (annual average 2000-2005) Paper Mfg. -16.7 Air Transportation -11.1 Plastics & Rubber Mfg. -9.9 Primary Metal Mfg. -8.0 Transportation Equip. Mfg. -7.8 Electrical Equip. Mfg. -7.0 Clothing Mfg. -6.9 Chemical Mfg. -6.1 Printing and related (Mfg.) -5.8 Textile Mills (Mfg.) -5.6 Private household services -4.4 Accommodation services -3.9 Federal Gov't Public Admin. -3.0 Non-Metallic Mineral Prod. Mfg. -2.8 Computer System Design Serv. -2.2 -20 -15 -10 -5 0 per cent Source: Statistics Canada.

GVRD Housing Starts GVRD Housing Starts Total Number of Housing Starts 2001-2005 Vancouver 24.8 17.4 Surrey/White Rock 8.5 Richmond 6.8 Burnaby 6.8 Langley (C+DM) Coquitlam 6.4 4.2 Maple Ridge / Pitt Meadows 3.8 Port Coquitlam 2.8 North Vancouver (C+DM) 2.5 New Westminster Delta 2.0 1.3 Port Moody 1.2 West Vancouver 0 5 10 15 20 25 30 thousands Source: BC Stats.

Most Household Formation Will be in Most Household Formation Will be in the GVRD the GVRD Number of Households Formed Over 5-Year Periods thousands 100 Fraser Valley 80 60 Greater Vancouver 40 Rest of BC 20 0 1990- 1995- 2000- 2005- 2010- 2015- 95 00 05 10 15 20 Source: BC Stats.

Population Growth Projections: Population Growth Projections: GVRD Municipalities* 2006- -2011 2011 GVRD Municipalities* 2006 Surrey 11.0 10.0 Maple Ridge-Pitt Meadows 8.4 Coquitlam New Westminster 6.7 Richmond 6.2 Burnaby 4.9 3.9 Vancouver North Vancouver 2.4 Delta 1.8 West Vancouver 1.7 7.3 Total 0 2 4 6 8 10 12 per cent change Source: BC Stats. * School Districts