B.C.'s economy has cooled and will likely cool further this year, according to a report released this morning by BMO Capital Markets Economics and BMO Commercial Banking.
The BMO Blue Book states that B.C. likely posted 2.4% real GDP growth in 2011 and is expected to moderate further in 2012.
"Growth is expected to moderate to 2.3% in 2012, as residential construction and government spending ease and U.S. economic growth continues at a sluggish pace," said Robert Kavcic, BMO Capital Markets economist.
The report says that B.C.'s "lofty" housing market has shown signs of cooling in recent markets, particularly in "formerly white-hot" Vancouver. It notes that Vancouver sales in January were 13% below January 2011 levels, and seasonally adjusted prices, after peaking above $800,000 in June, are now closer to $700,000.
The report adds that uncertainty over the timing of the transition from HST back to PST/GST appears to be having a negative impact on the new home market. It predicts that housing starts in B.C. will moderate to 23,000 this year from 26,400 in 2011.
"We are receiving mixed signals from B.C.'s commercial sector, with a strong atmosphere of caution and a holding pattern in business activity," said Derral Moriyama, BMO's senior vice-president, commercial, Greater Vancouver District.
Moriyama noted that a number of sectors are exhibiting strength.
"Construction and engineering firms report that they're extremely busy, with renewed opportunities for jobs and capital machinery purchases."
He added that B.C. has seen a "solid increase" in manufacturing activity, but he cautioned that customers are concerned about the halting nature of the economic recovery.
"With any momentum seemingly stalled by single announcements in Europe, they feel as if they are taking two steps forward and one step back."
In November, the Conference Board of Canada forecast that B.C. would grow 2.6% in 2011 and 2.5% in 2012.
