Vancouvers Econom ic Prospects: 2 0 1 0 and Beyond presented to: - - PowerPoint PPT Presentation

Vancouver’s Econom ic Prospects: 2 0 1 0 and Beyond

presented to:

Vancouver Real Estate Forum

April 29, 2008 Vancouver, BC

Ken Peacock

DIRECTOR ECONOMIC RESEARCH

2

BC Economy: Overall Picture

• Strong multi-year expansion giving way to a

below average performance

» real GDP growth averaged 3.4% over 2003-2007, vs 2.6% over 1997-2003

• Resilient domestic economy

» construction should help propel the economy, but it is already at elevated levels » non-residential building activity has likely peaked

• Widespread weakness in export sector

» lumber prices and output down » value of exports down in almost all categories » pulp is providing a lift » 2008 will mark third year of lower exports

3

Strong Job Growth

Em ploym ent Grow th

• 0.5

0.5 1.5 2.5 3.5 4.5 02 03 04 05 06 07 08

y/ y per cent change

BC Labour Market

Source: Statistics Canada, seasonally adjusted quarterly averages. Latest: Q1 2008

Unem ployment Rate

3 4 5 6 7 8 9 10 02 03 04 05 06 07 08

25 yr avg. per cent

4

Employment Growth Stronger in Metro Vancouver Again

BC Em ploym ent Grow th by Region

• 3
• 2
• 1

1 2 3 4 5 6 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1

Lower Mainland Rest of BC

y/ y per cent change

5

Non- residential Building Activity, BC quarterly S.A.

200 400 600 800 1000 1200 1400 1600 95 97 99 01 03 05 07 Building Permits Investment, current $ Investment, real 2002 $

Source: Statistics Canada.

millions $

Latest: permits Q4 2007, investment Q1 2008

Non-residential Construction Activity Has Peaked

6

I ndustry

Growth 2003-06 (% ) Growth 1997-03 (% )

15.0 0.7

• 4.3
• 4.1

1.7 Meat product manufacturing 11.9 2.9 Warehousing & storage 10.2 2.4 Electric power engineering construction 9.4 6.1 Primary & fabricated metal product mfg. 11.2 3.0 Computer & peripheral equipment mfg. 9.9 18.4 Cement & concrete product mfg. 9.5

• 2.1

14.9 14.7 12.7 Construction -- other Transportation engineering construction Non-residential building construction Residential building construction

Top Ten BC Growth Industries

(ranked by average annual real GDP growth 2003-2006)

Source: Statistics Canada.

7

GVRD Net Migration

• 20
• 10

10 20 30 40 50 60

1995/ 96 1996/ 97 1997/ 98 1998/ 99 1999/ 00 2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07 I nt raprovincial I nt erprovincial I nt ernat ional

Immigration Driving Almost 100% of GVRD Population Growth

thousands

Source: BC Stats. Latest 2006/ 07

8

Post Olympics Growth?

• Olympic host countries usually experience an

acceleration in GDP growth during the event year, followed by sub-par growth the next year

» of the 11 summer Olympics held since 1956, 10 host countries showed a significant slowdown after the Olympics (from + 1% above growth trend to -1.2% below trend) » for investment the swing is even more pronounced: from 3.3% above-trend growth to 7% below-trend » pattern not surprising given large investment in the run- up to the event and the surge in tourism receipts in the Olympic year » positive sentiment may accompany the Olympics, buoying consumption and investment in areas not directly related to the Olympics followed by anticlimactic sentiment effect

Source: Analysis of growth performance Morgan Stanley.

9

Major Projects: Lower Mainland

• There are now 411 major projects (in excess of $20 million)
• n the books in the LM (Q4 2007)

» roughly the same over past two years » 228 are started, 150 proposed » estimated value $53 billion

• Selected Lower Mainland projects underway

(millions)

» RAV line $1,900 » Vancouver International Airport Expansion $1,775 » Vancouver Convention Centre $ 883 » Golden Ears Bridge $ 650 » Sea-to-Sky Highway Upgrades $ 600 » GVRD Capilano/ Seymour Filtration Plant $ 600 » Abbotsford Regional Hospital $ 355 » UBC University Town $ 350 » Deltaport Third Berth $ 272 » Fraser River Port Expansion $ 190 » Richmond Speed Skating Oval $ 178 » Vancouver Olympic Village $ 162 » Whistler Olympic Village $ 130

10

Major Projects cont’d

• Selected Proposed Lower Mainland projects

($ millions)

» Port Mann Bridge/ Highway 1 $1,728 » South Fraser Perimeter Road $1,002 » Rapid Transit Rail Service (Surrey-Langley) $ 350 » Roberts Bank Rail grade separation $ 300 » Lions Gate Sewage Treatment $ 200 » Pitt River Bridge $ 194 » Abbotsford Airport Expansion $ 100 » Boundary Bay Airport Redevelopment $ 80 » North Fraser Perimeter Road $ 72 » Skytrain extension to UBC ?

11

Factors Sustaining BC Factors Sustaining BC’ ’s Expansion s Expansion

• Western economic strength
• In-migration / population growth
• Economic diversification, Asia Pacific growth and

the gateway role

• Infrastructure investment
• Low inflation / interest rate environment
• More competitive tax structure
• Improved fiscal position of BC government

12

Growth Constraints and Shifting Growth Constraints and Shifting Competitive Landscape Competitive Landscape

• Additional run-up in the value of the Canadian dollar

against the US greenback (up 20% in 2007, on top of previous 37% gain from Q2 2002 to January 2007)

• Higher electricity prices and new “carbon costs” for BC

industry

• Labour/ skill shortages
• Small, heavily resource-dependent export sector, plus

large and growing trade deficit, limit future gains in prosperity

• Impact of pine beetle
• Poor productivity record
• Winding down of construction boom and post

Olympics ‘hangover’

13

BC Real GDP Growth

2.8 3.2 1.3 3.2 3.1 2.0 2.8 3.5 4.6 4.5 0.6 2.5

1 2 3 4 5

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08f 09f 10f 11f

per cent

Post Olympics Slowing Most Likely Scenario Post Olympics Slowing Most Likely Scenario

Source: Statistics Canada for history, forecasts BCBC.

14

Ken Peacock Ken Peacock kpeacock@bcbc.com kpeacock@bcbc.com

• r
• r

604 604-

• 684

684-

• 3384

3384