While western Canada is expected to continue to grow faster than the national average, B.C. may not be keeping pace, according to RBC Economics’ most recent provincial outlook.
The bank suggests weak economic activity and unexpectedly weak capital-spending intentions — due in part to a weak final quarter in 2012 — were behind its decision to trim B.C.’s real GDP growth estimate from 1.6 per cent to 2.3 per cent to 2013.
The tepid finish to 2012 included employment falling off between October 2012 and January 2013, retail sales and manufacturing shipments stagnating and activity in the home resale market continuing to slide.
“While it was a slow start to the year, we expect that the relatively soft economic picture in British Columbia will be short-lived. In fact, we are already seeing signs that housing resales are stabilizing, new motor-vehicle sales are improving and that employment regained its footing in February,” RBC senior economist Craig Wright said.
Wright also noted there are encouraging signs in the sustained recovery in U.S. homebuilding, as B.C. lumber exporters will reap the benefits of increasing demand from south of the border.
The initial stages of recovery last year generated a 25 per cent increase in B.C. lumber exports to the U.S.
Business capital spending in the province is expected to play a minor role in 2013, as both the mining and oil and gas industries are expecting to curtail growth.
“Needless to say, this may not be the year for an investment boom in B.C.,” said Wright, adding the drop in spending comes as a disappointment.
While growth in 2013 is now expected to be modest, RBC has predicted it could rise to 2.7 per cent in 2014, fueled by export lumber and a return to capital spending inside B.C.
Nationwide, the picture is more positive.
Royal Bank is forecasting that the economy will do slightly better than most expect in the next two years, while the Canadian dollar dips.
The bank projects growth rates of 1.8 per cent for 2013 and 2.9 per cent for 2014, a couple of decimal points better than the consensus estimate federal Finance Minister Jim Flaherty will be using in Thursday’s budget.
But the bank says the Canadian dollar is unlikely to see sustained parity again over the next two years, predicting an average of about 96 cents US in 2013 and 98 cents US in 2014.
And while a weaker loonie is bad news for snowbirds and cross-border shoppers, it should do wonders for exporters and Canadian manufacturers, reducing the price of what Canadians ship abroad and raising the cost of imports.
© Copyright 2013