The B.C. commercial leading indicator (CLI) index, an economic measure used to predict changes in the economy, experienced a modest pullback in the third quarter of 2016 but continues to have year-over-year gains of 2.4%, according to the British Columbia Real Estate Association (BCREA).
“Job growth in key commercial sectors and robust consumer demand led the CLI higher in the third quarter,” BCREA economist Brendon Ogmundson said in a press release. “A rising CLI points to continued strength in B.C. commercial real estate activity in 2017.”
According to the BCREA, employment gains in sectors that lead commercial activity were able to offset moderate declines in economic activity. Office employment increased by almost 10,000 jobs for the second straight quarter. Manufacturing jobs rose for the first time this year after two quarters of decreasing payrolls. The BCREA said these trends accounted for all of the third-quarter increase in the CLI.
Retail sales growth slowed in the third quarter but sill posted year-over-year growth of 6%. Growth in wholesale trade also slowed, from 8% in the second quarter to 5.4% in the third. Even with moderate declines, the growth in wholesale and retail sales was enough to offset B.C.’s quarterly manufacturing declines of 1.6%.
Strong growth in economic activity in the first two quarters of 2016, which drove the CLI higher through the beginning of the year, weren’t as evident in the third quarter. A dip in key commercial economic activity indicators like manufacturing sales and wholesale trade were a drag on the index during the third quarter.
The CLI’s financial component also had a minor pullback, as Canadian real estate investment trusts (REIT) lost momentum after a rally in the second quarter. Canadian REIT prices were down 1% in the third quarter following a 10% increase in the previous quarter. The CLI’s drop was disappointing as the second quarter’s financial gains ended four straight quarters of declines. The financial component has now posted declines in five of the last six quarters.
Overall, while the CLI saw some pullback in the third quarter of 2016, year-over-year growth is encouraging, the BCREA said.
