February 8, 2010

Economic outlook

Five-year forecast looking up for British Columbia construction industry

RICHARD GILBERT

staff writer

B.C.’s construction industry is predicted to lead the charge out of the province’s worst recession since 1982.

“The leading or strongest-growing industry in the next five years to 2014 is construction, which is entirely domestic oriented with no exports,” said Central 1 Credit Union’s chief economist, Helmut Pastrick.

“Construction benefits from the housing rebound and later from more non-residential investment related to some major projects in the utilities, transportation, and mining sectors, as well as new demand from the commercial real estate sector.”

Central 1 Credit Union produced an economic forecast, which predicts B.C.’s economy will experience a moderate recovery in the next two years.

“In 2010, the Winter Olympics provide a temporary economic boost and the coming Harmonized Sales Tax will also lift first-half spending, though at the expense of some second-half activity,” said Pastrick in the report.

The provincial economy will experience a low growth rate of 2.5 per cent in 2010 and 2.6 per cent in 2011.

This growth represents a mild recovery from a small decline in 2009.

Domestic-oriented industries will drive the growth, while export-oriented industries are expected to rebound slightly, but growth will be slower.

“Growth occurs across all main industry groupings, but in varying degrees due to their differing demand and supply situations.”

Growth of the provincial economy will then accelerate to 3.5 per cent in 2012, 4.2 per cent in 2013 and 3.7 per cent in 2014.

The construction industry declined by 12.4 per cent to $8.2 billion in 2009.

However, construction GDP is predicted to increase by seven per cent in 2010 and 4.4 per cent in 2011.

Government spending, particularly on fixed capital or public infrastructure, remains elevated in 2010 and diminishes in 2011 and 2012, as fiscal stimulus winds down.

However, construction output will then accelerate in the next three years, growing by 9.5 per cent in 2012, 11.6 per cent in 2013 and 8.9 per cent in 2014.

In this period, engineering-type construction activity is the main source of growth and reflects the impact of major project investments in utilities and transportation.

Engineering construction is predicted to grow about 60 per cent in the next five years, while non-residential building construction activity climbs 30 per cent.

As a result, construction employment is expected to increase by 30 per cent in the next five years.

The report predicts that housing will pick up momentum coming out of the recession.

Housing starts are forecast to keep expanding during the five-year period on the strength of pent-up demand, existing homeowner turnover, additional investor demand, and new households from population and income growth.

Housing starts will jump more than 50 per cent in 2010 from last year’s deep bottom and climb to more than 30,000 units in 2012 and almost 40,000 units in 2014.

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