B.C. fared well against most regions of the country in 2014 provincial economic growth, according to official estimates.
In line with our estimates, growth in B.C.’s real gross domestic product (GDP) reached 2.6% last year, up from 2.1% in 2013. Among provinces, B.C. ranked second behind only Alberta, which expanded by 4.4%, and above the national expansion of 2.4%.
While last year’s gain was favourable against most other provinces, B.C.’s growth remained moderate – which has been the norm following the recession. Growth was the strongest since 2011 but similar to the long-term trend of about 2.5% and below levels observed in the mid-2000s. Similarly, per capita GDP growth was also in line with longer-term averages.
We expect above-average growth to continue this year, with B.C. being one of Canada’s growth leaders.
While lower oil prices drive growth lower in Alberta and other oil-producing provinces, B.C. will benefit from the lower Canadian dollar, continued low interest rates and a rebound in U.S. economic activity, which will drive exports and housing.
At the industry level, growth picked up in the goods and services-producing sectors from 2013, although the latter posted a stronger performance with a 2.7% gain, compared with growth of 2% in the goods sector.
B.C.’s resource sectors posted a mixed performance last year. Forestry and logging output declined 8.1%, while the mining and oil and gas sectors expanded by 4.6%.
Housing-related investments continued to drive construction last year. Construction output rose 3.1% on a 7.3% surge in residential activity but was offset by a downturn in non-residential activity.
Manufacturing growth met our expectation with 3% growth.
Among key sectors, output of wood products and paper ramped up by more than 5.5%, while machinery manufacturing climbed nearly 8%. A weak link was primary metal manufacturing, which slumped 13%.
On the services side of the economy, B.C. recorded strong gains in trade. Wholesale and retail trade climbed more than 4%, with the latter driven by auto sales, home furnishings and electronics – a reflection of uplift in the housing market.
Growth in finance and insurance slowed slightly from 2013 to 3%, but real estate and leasing gained nearly 4%.
Rising tourist flows also provided a lift to the economy as accommodation and food-services growth climbed more than 5%, owing both to rising hotel stays and restaurant meals.•
Bryan Yu is senior economist at Central 1 Credit Union.
