Downturn in home construction leads to BC's economic suffering

The Conference Board of Canada says a sudden correction in British Columbia’s housing sector is a key factor in an economic contraction it is forecasting for the province this year.

The correction, with a corresponding decline in housing starts, will lead to job losses and lower domestic spending, the Conference Board said in its Winter 2009 Provincial Outlook report.

The report forecast a 0.1-per-cent contraction of the B.C. economy this year before the effects of the U.S. government’s economic stimulus package spur exports and a return to 4.3-per-cent growth in 2010.

“The pillar of British Columbia’s recent economic boom — the domestic economy — is suffering,” the report said.

The board said a sudden end to the boom in housing market speculation and a decline in what had been strong employment and wage growth in the sector “are the culprits for this abrupt adjustment.”

“The result will be job losses in real estate, finance and construction.”

The report said B.C.’s forest sector has felt the sting of declining U.S. housing markets since 2006, but other important export sectors, such as mining and manufacturing, are also starting to hurt because of falling commodity prices and declining trade.

Nationally, the Conference board said only Ontario, Saskatchewan and Prince Edward Island saw the value of planned construction increase in January.

“No province is immune to the effects of the global recession, but the momentum in the domestic economies of Saskatchewan and Manitoba will cushion the blow from the downturn in the resource sector,” said Pedro Antunes, director of the board’s national and provincial forecast.

“The outlook for the second half of the year is more optimistic. All provinces are expected to bounce back in 2010, as the U.S. economy hits bottom and begins to recover.”

(prepared by Derrick Penner/Vancouver Sun)