Sunday, November 18, 2012

BC Economic Snapshot Nov. 17, 2012

VANCOUVER, BC, Nov. 17, 2012/ Troy Media/ – British Columbia’s re-sale housing market continued to slow in October. Sales via the Multiple Listing Service (MLS) totalled $2.62 billion, seasonally adjusted, down 2.2 per cent from September. Unit sales declined 2.0 per cent, while the average sale price inched down 0.2 per cent.

In the first 10 months of this year, sales volume totalled $31.1 billion, down 18.2 per cent from the same period last year. Unit sales decreased 10.1 per cent while the average sale price decreased 8.1 per cent.

B.C.’s re-sale housing market has been trending down since early in 2011, the third slowdown in the last five years. Each downturn has lasted on average less than 1.5 years, and each has been followed by a sharp upturn. The current slowdown is coincident with a series of federal policy changes aimed at dampening residential investment.

Assuming no further such policy changes, we forecast housing sales volume in B.C. will continue to be slow through early 2013, followed by resumed expansion.

The latest trends in housing sales volume has varied among regions and has not occurred everywhere. The table to the left shows the percentage change in dollar volume in the three months ending October compared to the three months ending July, by real estate board. Most board areas have seen declining sales, while some have seen higher sales.

Manufacturing sales in British Columbia inched lower in September led by declines in paper and wood products. Sales totalled $3.2 billion, seasonally adjusted, down 1.2 per cent from August.

Manufacturing sales have trended more or less level for the past year. In the first nine months of 2012, manufacturing sales in B.C. totalled $29 billion, up a slight $222 million or 1 per cent from the same period last year.

Year-over-year growth was led by gains in transportation equipment, wood product and machinery manufacturing, mostly offset by declines in paper, primary metal and miscellaneous product manufacturing. We forecast wood products manufacturing will grow almost 20 per cent between 2011 and 2016 on a recovery in U.S. housing starts, which have been at historic lows since 2008. Another positive factor is further expansion into China’s market even though wood products exports to China, including logs, will be down this year from 2011 due to its housing construction decline.

The accelerated harvest of pine beetle-infested trees is a contributing growth factor, but this will begin to wane as supply constraints materialize. Annual growth in wood products manufacturing output will slow noticeably in 2015 and 2016.

In contrast to solid wood products, pulp and paper manufacturing will fare poorly. GDP output will contract in 2012 making it two consecutive yearly declines. Less demand for pulp in all major markets has caused lower prices and volumes.

China’s strong growth in 2011 offset weakness in other markets but this year China is also importing less pulp from B.C. The outlook for the pulp sector is for soft market conditions to continue into 2013 before modest gains materialize.

The multi-year decline in newsprint production will continue and drag down the pulp and paper sector so that GDP in 2016 is little changed from 2011.

Primary metals manufacturing will receive a significant boost in 2015 when the Rio Tinto Alcan modernization and expansion of the aluminum smelter in Kitimat is completed.

We forecast real GDP in this industry will jump about 25 per cent in 2015. The $3.3 billion investment will increase the smelter’s capacity by 48 per cent, generating several hundred construction jobs, and boosting spending on machinery and equipment as well as non-residential industrial building construction.
| Central 1 Credit Union


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