Retail sales in B.C. are forecast to fall 1.2% in 2009, erasing almost all the increases in sales in 2008, according to Central 1 Credit Union.
Retail sales rose 1.3% last year, down from a robust 6.7% increase in 2007. The first half of 2009 is expected to be particularly challenging for retailers as consumer confidence remains at record lows due to continued uncertainty caused by the financial crisis and global recession.
Inflation isn't expected to grow substantially next year as B.C.'s consumer price index (CPI) is on pace to increase about 0.8% this year from 2.1% in 2008. This year's projected increase will be the slowest since 1998, when prices rose a mere 0.3%.
B.C.'s manufacturing industry, especially the forestry sector, is expected to shrink again this year. Manufacturing sales fell 3.6% from October to November, according to Statistics Canada estimates. The bulk of the declines were in the wood and paper product sectors, while machinery manufacturing also dropped in November.
Central 1 forecasts that the forestry sector will post a 7% decline in output following a 17% decline in 2008 and an 8% slide in 2007.
Despite the dour prediction, Central 1 said the recession in the forestry sector will likely end in 2010, assuming the U.S. housing market recovers from its lowest levels in 50 years. U.S. housing starts fell 16% in December, the largest monthly decline thus far in the current recession.