While Vancouver’s economic growth is forecast to slow to 2.4 per cent in 2017, it will remain one of the fastest growing major metropolitan economies in Canada, according to The Conference Board of Canada’s Metropolitan Outlook: Spring 2017. Meanwhile, Victoria’s economic growth will remain healthy at 2.1 per cent in 2017.
Victoria’s economic growth to remain healthy in 2017.
Ottawa, May 25, 2017—While Vancouver’s economic growth is forecast to slow to 2.4 per cent in 2017, it will remain one of the fastest growing major metropolitan economies in Canada, according to The Conference Board of Canada’s Metropolitan Outlook: Spring 2017. Meanwhile, Victoria’s economic growth will remain healthy at 2.1 per cent in 2017.
“At the centre of Vancouver’s slower economic growth is the cooling housing market, which will limit output growth in two of the city’s top performing industries—construction and finance, insurance and real estate. However, we still expect these industries to log decent performances and other areas of the economy to pick up some of the slack,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. “Meanwhile, Victoria’s economy will be boosted by continued public administration hiring, a healthy tourism outlook, and solid construction activity.”
- Vancouver’s real GDP is expected to grow 2.4 per cent this year and 2.5 per cent in 2018.
- Employment growth is forecast to slow dramatically to about 14,000 new jobs in Vancouver this year after a record 61,000 jobs were added in 2016.
- Real GDP in Victoria is forecast to expand 2.1 per cent both this year and next.
- Toronto is expected to post the fastest-growing metropolitan economy this year with growth of 2.7 per cent.
One of the key drivers of Vancouver’s impressive economic growth over the last few years has been the booming housing market. But the region’s resale housing market started slowing last spring, and provincial and federal government housing policies announced last summer and fall aimed at cooling real estate markets accelerated this slowdown. Although the housing market is stabilizing, the city’s construction, and finance, insurance and real estate sectors––both with strong links to the housing industry— are expected to grow at a much more moderate pace over the next two years.
Following a record 27,900 units in 2016, housing starts in Vancouver are projected to dip but will remain higher than historical norms at 23,600 units this year. Fortunately, this will be offset by a pick up in non-residential investment, as work begins on several major projects, including the $3.5-billion 10-lane bridge spanning the Fraser River to replace the Massey Tunnel. Overall, construction output growth is set to moderate to 2.0 per cent this year, following 5.2 per cent average annual gains between 2012 and 2016.
On the bright side, wholesale and retail trade will remain healthy as strong job gains and income growth continue to embolden consumers. At the same time, the transportation and warehousing industry will benefit from a nearly 50 per cent increase in flights between Vancouver and China by summer 2017, as tourists continue to flock to the region to take advantage of the weaker Canadian dollar. Solid tourism activity will also benefit the personal services industry, which includes accommodation, food, and arts, entertainment and recreation. Vancouver’s manufacturing sector will continue to post strong gains thanks to several large projects, including the federal government’s $8-billion contract with Seaspan, and a healthy U.S. economy and weak Canadian dollar.
Last year, employment made exceptional gains as a record 61,000 jobs were added to payrolls in Vancouver. But we expect a much more muted 14,000 jobs to be created this year, in line with the region’s moderating economic growth.
As the provincial capital, Victoria’s economic outlook is closely tied to the public administration sector, and strong hiring last year helped spur solid real GDP growth of 2.7 per cent. Fortunately, further public administration job gains are on tap for this year, though the rate of increase will be more moderate. As such, public administration output growth is projected to slow sharply from 6.8 per cent in 2016 to 1.3 per cent in 2017. Nonetheless, the overall economy is forecast to advance at a healthy pace of 2.1 per cent this year, as other industries help pick up the slack.
In particular, several sectors on the services side are poised to post output growth greater than 2 per cent, including wholesale and retail trade, finance, insurance and real estate, personal services, and transportation and warehousing. The personal services and transportation and warehousing industries will both benefit from a strong tourism outlook, driven by healthy flight and cruise traffic as well as a weaker Canadian dollar. All in all, the aggregate services sector is forecast to post output gains of 2.1 per cent this year and next.
At the same time, a healthy mix of residential and non-residential projects are expected to fuel steady output growth of 2.4 per cent this year in Victoria’s construction sector. Housing starts are forecast to dip from 2,900 units in 2016 to a still-strong 2,400 units this year. On the non-residential side, work continues on the McKenzie Interchange and the Sidney Gateway Shopping Centre.
Finally, the manufacturing industry has been one of Victoria’s top performers in recent years. However, growth is expected to slow to a still solid 2.8 per cent as several major contracts reach completion, including federal shipbuilding contracts at Seaspan’s Victoria Shipyards.
Of note, Toronto is expected to boast the fastest-growing metropolitan economy this year among the 13 census metropolitan areas covered in this edition of the Metropolitan Outlook.