B.C. Economic Snapshot April 14

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VANCOUVER, BC, Apr. 14, 2012/ Troy Media/ – Following a sharp decline in January, exports of B.C. goods to international markets partly rebounded in February reflecting gains in the industrial goods/ material and energy sectors. Total seasonally-adjusted export volume rose 7 per cent from January to reach $2.65 billion.

Despite February’s gain, the downward trend in current-dollar and constant-dollar export volumes that has persisted since the early fourth quarter remained intact. Weaker global economic conditions contributed to a tempering in real demand and softening of commodity prices.

Meanwhile, an abundance of new supply from shale deposits has led to some of the lowest natural gas prices in decades, putting downward pressure on natural gas exports.
Over the course of the first two months of 2012, current-dollar export volumes remained modestly ahead the same-period 2011 by 3.7 per cent, but if the current downtrends persists this gap will continue to narrow in the months ahead.

Housing

Total housing starts in B.C.’s urban markets pulled back in March, following two straight monthly gains to a seasonally-adjusted annualized rate (SAAR) of 20,900 units.

This was down 28 per cent from a pace of 28,900 observed in February as Metro Vancouver builders began work on fewer multi-family units. While March’s decline was substantial, volatility in monthly housing starts is the norm rather than the exception in B.C.

Multi-family product, which includes apartments, townhomes and other attached units make up more than 60 per cent of all housing starts, a share that has generally risen over the past decade. Given that multi-family projects vary in size and scope, and are indivisible, the commencement of larger projects can lead to substantial gains in starts in any given month, and comparably lower activity in those that follow.

March starts remained within the range observed since early 2010, and the one-month decline is not considered the start of a trend. Monthly SAAR starts have fluctuated around an average of 24,200 units since early 2010.

Although provincial starts have remained range-bound below levels observed in the mid-2000s, new home building activity in Metro Vancouver has generally trended higher and is comparable to pre-recession levels. In contrast, many other markets struggle under the weight of weak recreational and retiree demand and an excess supply of home inventory. We forecast total housing starts (including rural activity) to hold steady in 2012 at close to 26,500 starts.

While expectations for tepid employment growth and low mortgage rates are unchanged, measures introduced by the B.C. government for the remainder of the HST/PST transition period should marginally boost demand for new homes.