Vancouvers Econom ic Prospects: 2 0 1 0 and Beyond presented to: - PowerPoint PPT Presentation

Vancouver’s Econom ic Prospects: 2 0 1 0 and Beyond presented to: Vancouver Real Estate Forum April 29, 2008 Vancouver, BC Ken Peacock DIRECTOR ECONOMIC RESEARCH

2 BC Economy: Overall Picture • Strong multi-year expansion giving way to a below average performance » real GDP growth averaged 3.4% over 2003-2007, vs 2.6% over 1997-2003 • Resilient domestic economy » construction should help propel the economy, but it is already at elevated levels » non-residential building activity has likely peaked • Widespread weakness in export sector » lumber prices and output down » value of exports down in almost all categories » pulp is providing a lift » 2008 will mark third year of lower exports

3 Strong Job Growth BC Labour Market Em ploym ent Grow th Unem ployment Rate per cent y/ y per cent change 10 4.5 25 yr avg. 9 3.5 8 2.5 7 6 1.5 5 0.5 4 -0.5 3 02 03 04 05 06 07 08 02 03 04 05 06 07 08 Latest: Q1 2008 Source: Statistics Canada, seasonally adjusted quarterly averages.

4 Employment Growth Stronger in Metro Vancouver Again BC Em ploym ent Grow th by Region y/ y per cent change 6 5 4 3 2 1 0 -1 Lower Mainland -2 Rest of BC -3 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1

5 Non-residential Construction Activity Has Peaked Non- residential Building Activity, BC quarterly S.A. millions $ 1600 Building Permits 1400 Investment, current $ 1200 Investment, real 2002 $ 1000 800 600 400 200 0 95 97 99 01 03 05 07 Latest: permits Q4 2007, investment Q1 2008 Source: Statistics Canada.

6 Top Ten BC Growth Industries (ranked by average annual real GDP growth 2003-2006) Growth Growth 2003-06 1997-03 I ndustry (% ) (% ) Construction -- other 15.0 0.7 14.9 -4.3 Transportation engineering construction 14.7 -4.1 Non-residential building construction 12.7 1.7 Residential building construction Meat product manufacturing 11.9 2.9 Primary & fabricated metal product mfg. 11.2 3.0 Warehousing & storage 10.2 2.4 Computer & peripheral equipment mfg. 9.9 18.4 Cement & concrete product mfg. 9.5 -2.1 Electric power engineering construction 9.4 6.1 Source: Statistics Canada.

7 Immigration Driving Almost 100% of GVRD Population Growth GVRD Net Migration thousands 60 I nt raprovincial 50 I nt erprovincial 40 I nt ernat ional 30 20 10 0 -10 -20 1995/ 96 1996/ 97 1997/ 98 1998/ 99 1999/ 00 2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07 Latest 2006/ 07 Source: BC Stats.

8 Post Olympics Growth? • Olympic host countries usually experience an acceleration in GDP growth during the event year, followed by sub-par growth the next year » of the 11 summer Olympics held since 1956, 10 host countries showed a significant slowdown after the Olympics (from + 1% above growth trend to -1.2% below trend) » for investment the swing is even more pronounced: from 3.3% above-trend growth to 7% below-trend » pattern not surprising given large investment in the run- up to the event and the surge in tourism receipts in the Olympic year » positive sentiment may accompany the Olympics, buoying consumption and investment in areas not directly related to the Olympics followed by anticlimactic sentiment effect Source: Analysis of growth performance Morgan Stanley.

9 Major Projects: Lower Mainland • There are now 411 major projects (in excess of $20 million) on the books in the LM (Q4 2007) » roughly the same over past two years » 228 are started, 150 proposed » estimated value $53 billion • Selected Lower Mainland projects underway (millions) » RAV line $1,900 » Vancouver International Airport Expansion $1,775 » Vancouver Convention Centre $ 883 » Golden Ears Bridge $ 650 » Sea-to-Sky Highway Upgrades $ 600 » GVRD Capilano/ Seymour Filtration Plant $ 600 » Abbotsford Regional Hospital $ 355 » UBC University Town $ 350 » Deltaport Third Berth $ 272 » Fraser River Port Expansion $ 190 » Richmond Speed Skating Oval $ 178 » Vancouver Olympic Village $ 162 » Whistler Olympic Village $ 130

10 Major Projects cont’d • Selected Proposed Lower Mainland projects ($ millions) » Port Mann Bridge/ Highway 1 $1,728 » South Fraser Perimeter Road $1,002 » Rapid Transit Rail Service (Surrey-Langley) $ 350 » Roberts Bank Rail grade separation $ 300 » Lions Gate Sewage Treatment $ 200 » Pitt River Bridge $ 194 » Abbotsford Airport Expansion $ 100 » Boundary Bay Airport Redevelopment $ 80 » North Fraser Perimeter Road $ 72 » Skytrain extension to UBC ?

11 Factors Sustaining BC’ ’s Expansion s Expansion Factors Sustaining BC • Western economic strength • In-migration / population growth • Economic diversification, Asia Pacific growth and the gateway role • Infrastructure investment • Low inflation / interest rate environment • More competitive tax structure • Improved fiscal position of BC government

12 Growth Constraints and Shifting Growth Constraints and Shifting Competitive Landscape Competitive Landscape • Additional run-up in the value of the Canadian dollar against the US greenback (up 20% in 2007, on top of previous 37% gain from Q2 2002 to January 2007) • Higher electricity prices and new “carbon costs” for BC industry • Labour/ skill shortages • Small, heavily resource-dependent export sector, plus large and growing trade deficit, limit future gains in prosperity • Impact of pine beetle • Poor productivity record • Winding down of construction boom and post Olympics ‘hangover’

13 Post Olympics Slowing Most Likely Scenario Post Olympics Slowing Most Likely Scenario BC Real GDP Growth per cent 5 4.6 4.5 4 3.5 3.2 3.2 3.1 2.5 2.8 2.8 3 2.0 2 1.3 0.6 1 0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08f 09f 10f 11f Source: Statistics Canada for history, forecasts BCBC.

14 Ken Peacock Ken Peacock kpeacock@bcbc.com kpeacock@bcbc.com or or 604- -684 684- -3384 3384 604