The sparkle of B.C.’s northeast economy will dim this year despite higher natural gas production and forestry activity, as upheaval in the global coal sector, a modest agriculture performance and more tempered commodity exploration promise to cut into regional growth. We expect modest growth for the economy over the next few years, but a decelerated pace of expansion this year and next.
Coal is the key headwind in the region as low prices and few signs of an impending global pickup in demand – particularly from China – have driven producers to shutter mines and curtail development over the past year. A more recent announcement by Anglo American to idle its Tumbler Ridge mine means there will likely be no coal mines in operation by some time in early 2015, down from four at the beginning of 2014. Times have indeed changed.
Despite this shock, there has been good news. Forestry activity is improving, with bigger timber harvests and increased production following reinvestments in local area mills. Meanwhile, the natural gas sector, which is exclusively in the northeast, has improved with stronger production and prices this year. The sector is forecast to show further improvement over the forecast period. Oil and gas GDP growth is forecast to reach 3%, with growth of above 4% in 2015 through 2017. Growth reflects higher gas prices, with one important caveat. Long-proposed liquefied natural gas projects in the provincial northwest need to be realized to drive a long-term upshift in sector expansion and exploration in the northeast. While the prognosis remains positive for the still-nascent sector, it is far from certain.
Employment is expected to decline by 4% this year but grow by about 2% through 2017. Despite the subdued profile, the labour market remains tight with relatively low unemployment and high labour force participation. Population growth slows to about 1% this year and next in response.
Housing generally remains firm due to population and income gains in prior years. Resale transactions trend modestly higher but hold below mid-2000 highs, while home prices gain 7% this year and average 3% per year through 2017. Demand has increasingly filtered into the new home market.
