Vancouver's economy set to cool considerably over the next two years
Victoria's economy also expected to moderate this year and next.
OTTAWA, Oct. 17, 2017 /CNW/ - Vancouver's real GDP is forecast to grow 3.2 per cent in 2017 and 2.5 per cent in 2018, after expanding nearly 4 per cent annually on average during the previous five years, according to The Conference Board of Canada's Metropolitan Outlook: Autumn 2017. Likewise, Victoria's economy is expected to slow but remain healthy over the next two years.
"The more moderate outlook for Vancouver and Victoria reflects the fallout from a cooler housing market, as well as factors like increased protectionism in the U.S. and a slightly higher dollar that is shaving export potential," said Alan Arcand, Associate Director, Centre for Municipal Studies.
Highlights
- Vancouver's real GDP growth is forecast to ease from 4.1 per cent in 2016 to 3.2 per cent in 2017, with an even more modest 2.5 per cent advance expected for 2018.
- Victoria's economy is on track to expand by 2.4 per cent in 2017 and by 2.2 per cent in 2018, down from a 2.8 per cent gain in 2016.
- Calgary and Edmonton are forecast to be the fastest growing census metropolitan areas (CMAs) in Canada this year, with real GDP forecast to grow by 4.6 per cent and 3.9 per cent respectively.
Vancouver
Vancouver's economic slowdown will be broad-based, affecting all sectors. Construction output is on track to post modest increases of 1.5 per cent this year and 1.9 per cent next year, down from a 5.5 per cent expansion in 2016. Rising interest rates, the relative absence of foreign purchasers, and a slowing economy will all slightly temper Vancouver's housing demand. Total starts are on track to fall from a record 27,900 units in 2016 to just under 25,400 units this year, with both single-family and multiple starts easing. Despite the cancellation of procurement for the Massey Tunnel replacement bridge project, solid non-residential investment activity will help offset easing housing starts and keep total construction output growth in positive territory this year and next. Meanwhile, manufacturing output is projected to climb by 2.4 per cent this year, down from a 5.4 per cent gain last year. The struggling provincial forestry sector in B.C.—hit by U.S. tariffs, forest fires, and the mountain pine beetle—might be unable to adequately supply wood product firms in Vancouver.
Vancouver's services sector is also poised to slow down this year and next. The cooler housing market is trimming output growth in finance, insurance, and real estate. On a positive note, wholesale and retail trade output is on track to jump 5.9 per cent this year, but slower job and income gains, coupled with rising interest rates, are expected to limit growth to 2.5 per cent next year.
Moderating economic growth will be accompanied by slowing job gains. Following a record 61,000 new jobs in 2016, employment creation is set to slow to about 33,200 this year and 21,500 in 2018. Still, this will be sufficient to cut Vancouver's unemployment rate to 5.1 per cent—a nine-year low—in 2017.
Victoria
Victoria's economy is expected to moderate but remain healthy over the near term, expanding by 2.4 per cent in 2017 and 2.2 per cent in 2018, down from a 2.8 per cent gain in 2016. In particular, construction output growth is set to decelerate in line with falling housing starts, which are expected to decrease from 2,900 units last year to 2,700 units this year and to 2,400 units next year. But thanks to the provincial government's strong fiscal position, the near-term outlook for Victoria's key public sector remains positive. At the same time, several private services industries are enjoying strong gains this year, though slower growth is in the cards for 2018. For example, output growth in wholesale and retail trade and in transportation and warehousing is expected to exceed 5 per cent this year, before slowing to 3.3 per cent and 2.0 per cent, respectively, in 2018.
Despite the more moderate expansion, Victoria's economy is on track to add 7,100 jobs in 2017, the biggest one-year gain since 2008. However, this pace of hiring is unsustainable and next year the economy is expected to create just 400 net new jobs. The combination of rising employment and an aging workforce implies that an already tight labour market will tighten even further in the coming years; Victoria's unemployment rate is forecast to fall from 5.2 per cent in 2016 to 4.4 per cent in 2018.
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