Housing market has bounced back

B.C. should see its GDP rise by 3.4 per cent this year, making it among Canada's economic growth leaders, according to an RBC Economics report released Thursday.

"We have good growth prospects for B.C. in 2010 and 2011, reflecting more favourable global financial conditions, improved prospects in the U.S. and a stronger economy related to the 2010 Olympic and Paralympic Games," Craig Wright, senior vice-president and chief economist, RBC, said in an interview about the RBC Economics Provincial Outlook. "And that will continue as we go forward.

"Also, the housing market in B.C. has bounced back and is producing continued support for the economy."

According to the report, B.C.'s forecast GDP rise of 3.4 per cent compares favourably to Canada's projected 3.1-per-cent growth in 2010.

The report said B.C.'s forecast growth rate represents a significant improvement compared to the contraction of 2.5 per cent in 2009, which marked B.C.'s worst performance since 1982.

However, the report also notes that B.C.'s forecast growth of 3.4 per cent in 2011 is slower than the national average of 3.9 per cent, mostly because of the removal of the "stimulus" the 2010 Olympics and Paralympic Winter Games provided.

Wright said it is also a reflection that in 2011, other provinces will begin bouncing back as well.

Wright said the 2010 Olympics has already provided a boost to tourism, retail trade and other services, adding that the Games will help speed up an emerging economic recovery, while positioning B.C. "as a top destination for travelling, emigrating and doing business."

The report also said that B.C.'s economy should continue to benefit from very low interest rates and that housing starts are expected to rise to 25,600 units in 2010, after falling to 16,000 units in 2009. However, the HST is expected to temper new home building in the second half of the year.

The outlook for B.C.'s labour market is also encouraging, with a predicted return to pre-recession levels by the end of the year, with RBC forecasting a rise in job growth of 2.1 per cent this year compared to a 2.4-per-cent decline in 2009. The unemployment rate should average 7.7 per cent, slightly higher than last year's 7.6 per cent, because of the entry of more people into the labour market.

Wright said capital investment should also pick up in B.C., "thanks in large part to strength in the energy and mining sectors."

Meanwhile, Central 1 Credit Union chief economist Helmut Pastrick agreed, in an interview, that B.C. should see renewed growth this year, although he assessed the RBC report as a bit too rosy.

"I'm a little lower on the growth rate [than RBC]," said Pastrick. "I see about 2.8 per cent this year and 3.0 per cent next year.

"And [RBC] is assuming stronger U.S. growth and more housing starts than I do. They have it at 25,600, while I have it at 23,000. But the difference [in RBC's and Pastrick's forecasts] isn't that large."

Nationally, the RBC report forecast unemployment rates to average 8.4 per cent in 2010 before falling to 7.7 per cent in 2011. It also said housing starts nationally are expected to grow to 184,000 in 2010, up from 149,000 in 2009.

(" B.C. to see strong growth this year and in 2011: RBC report" prepared by Brian Morton/Vancouver Sun)