Saturday, November 24, 2012

BC Economic Snapshot Nov. 24, 2012

VANCOUVER, BC, Nov. 24, 2012/ Troy Media/ – Retail sales in British Columbia inched up in September from August, even as sales in metro Vancouver declined.

Province-wide sales totalled $5.1 billion in September, up 0.3 per cent from August. In metro Vancouver, sales declined 1.7 per cent to $2.4 billion, while elsewhere in the province sales increased 2.1 per cent to $2.7 billion. All figures are seasonally adjusted unless otherwise noted.

In the first nine months of 2012, retail sales totalled $45.4 billion in B.C., unadjusted, up 3.3 per cent from the same period last year. Year-to-September sales in metro Vancouver were up 5.1 per cent year-over-year, while elsewhere in the province sales were up 1.8 per cent.

Retail sales in B.C. have trended down since the record high was set in February. Consumer spending will undergo a mild resurgence in 2013 when the PST tax system comes into effect. The switch back to the PST will likely prompt a pickup in spending on some consumer services such as restaurant meals, entertainment, and travel. Some current spending could be postponed until after March 31, 2013 to take advantage of the lower retail sales tax.

Tax system changes aside, consumer spending fundamentals will remain modestly positive resulting in below-average growth for most of the forecast. Modest income and job growth along with low population growth will restrain spending growth in the near term despite ultra-low interest rates.

In addition, consumer confidence will remain fragile until the macroeconomic environment and the European debt crisis improves. We forecast retail sales in B.C. will rise 3.6 per cent this year and 4.5 per cent in 2013 following growth of 3.1 per cent last year.

New motor vehicle sales in British Columbia increased in September and remain well above year ago levels. Sales in September totalled 15,679 units, seasonally adjusted (SA), up 8.1 per cent from August.

The average sale price was $34,926 SA, down 1.4 per cent month-over-month. Total dollar sales volume in September was $548 million SA, up 6.6 per cent from August.

In the first nine months of 2012, new car and light truck sales totalled 136,638 units in B.C., up 11.7 per cent from the same period last year. The average price is down 1.3 per cent on the same basis, while dollar volume is up 10.2 per cent.

Pent up demand, low financing rates, moderate income growth and aggressive pricing are the key factors driving this year’s higher new motor vehicle sales. We forecast unit sales will rise 10 per cent this year and 4 per cent in 2013, following a 2.5 per cent increase last year.


International non-resident traveler entries to British Columbia declined in September but have trended more or less level for the past year and a half. Visitor entries totalled 352,120, seasonally adjusted (SA) in September, down 3,644 persons (1.0 per cent) from August.

U.S. visitors totalled 278,276 SA, down 1,247 (0.5 per cent) while visitors from the rest of the world totalled 113,590 SA, down 2,397 (2.1 per cent). Despite the recent no-growth trend, the inflow of international visitors to B.C. so far this year is up slightly from the same period last year.

In the first nine months of 2012, international visitors totalled 3.55 million persons, up 1.0 per cent from the same period last year. Year-to-date visits from U.S. residents are up a slight 0.5 per cent year-over-year, while non-U.S. international visitors are up 2.1 per cent.

British Columbia’s international visitors are mostly American, British, French, German, Japanese and Australian. Growth from such mature markets is stagnant and American visitors have been in decline for the past decade. In contrast, growth in visitors from emerging markets like India, Brazil and China is robust but volumes are, as yet, modest compared to those from mature markets.

We forecast U.S. visitors will increase 1 per cent this year and decline 1 per cent in 2013 following a 3.3 per cent decrease last year. Non-U.S. international visitors are forecast to rise 1.5 per cent this year and not grow in 2013 following a 2.8 per cent decrease in 2011. Total international visitors are thus forecast to rise 1.3 per cent this year and decline 1 per cent next year following a 3.1 per cent drop in 2011.

British Columbia’s real gross domestic product (GDP) in 2011 increased by 2.8 per cent from 2010, according to Statistics Canada’s first preliminary estimate released this week. That is more than our latest estimate of 2.6 per cent.

Statistics Canada also revised estimated real GDP growth in 2010 to 3.2 per cent (up from 3.0 per cent), 2009 to -2.5 per cent (down from -2.1 per cent) and 2008 to 1.1 per cent (up from 0.7 per cent).

Growth in 2011 was led by higher consumption, which added 1.9 per cent to real GDP, led by household consumption of services. Household consumption of goods also increased, as did consumption by governments and non-profit institutions.

More investment in fixed capital added 1.7 per cent to real GDP in 2011. Business investment in non-residential structures, machinery and equipment accounted for most of this growth. Business investment in residential structures also increased, as did business investment in intellectual property and inventory. Meanwhile, government investment in fixed capital decreased.

Increased exports added 1.9 per cent to real GDP. International and domestic goods exports accounted for most of this growth although service exports to other provinces also increased. Increased imports subtracted 3.0 per cent from real GDP in 2011.

International and domestic goods imports accounted for most of this reduction although service imports also increased. British Columbia’s trade deficit, exports minus imports, continued to be the largest drag on economic growth. British Columbia faces modest economic growth through 2013.

We forecast real GDP will increase 1.7 per cent this year and 1.9 per cent in 2013, following growth of 2.8 per cent last year. Higher investment in fixed capital and a lower trade deficit lead real GDP growth to 3 per cent per year from 2014 to 2016.

Consumer price inflation in British Columbia remained extremely low in October as prices for fresh vegetables, natural gas, homeowners’ replacement cost, clothing, passenger vehicles and healthcare and recreation declined from 12 months earlier.

B.C.’s Consumer Price Index (CPI) registered a year-over-year increase of 0.5 per cent, down from 0.7 per cent last month. On a monthly basis, September’s CPI decreased 0.1 per cent from September.

We forecast consumer price inflation will cool to 1.7 per cent in 2012 and 1.4 per cent in 2013 from 2.6 per cent in 2011 due to lower energy costs and to the end of HST base effect. The switch back to the PST plays a role in the CPI for 2013 by causing a one-time drop of about 0.3 per cent.

Inflation gathers momentum on rising commodity prices by 2016.
| Central 1 Credit Union


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