It is one of the most unaffordable places to live in Canada, but one big bank says B.C.’s economy is doing well compared to the rest of the country.
TD has released its latest Provincial Economic Forecast and it shows B.C. only trails Prince Edward Island in GDP growth.
Marc Ercolao is a TD Bank economist, and he admits this surprises him, given the high amount of debt they saw British Columbians carrying last year.
“But there were some offsets there, especially in the services sector, driven by public services, real estate, and professional services that ultimately boosted growth,” he said.
“Looking forward, we do think growth, relative to Canada will underperform a bit but factors like strong population growth, solid employment markets through the first quarter of this year, stronger government spending plans — we think this will support the B.C. economy to a greater degree.”
Ercolao thinks the game changer will be the Bank of Canada cutting interest rates.
“I think a lot of consumers in B.C. will be looking forward to further interest rate cuts where we have this pent-up demand for housing and people still sitting on the sidelines, waiting for these interest rate cuts. We would expect over the second half of this year and into 2025, for example, home sales to pick up in the region.”
Ercolao acknowledges there are still major unaffordability issues living in a province, such as the high cost of food, gas, and housing.
“We would expect for now, anyways, retail sales and overall consumption to be a little more subdued and then once interest rates start to come down, it should add a little bit of fuel to demand and overall spending.”
He’s confident the Consumer Price Index (CPI) will eventually get back to the two per cent range.
“When you have a stable price environment, it allows consumers to better plan their expenditures. It allows businesses to plan their spending and their investments a little better as well. On the prices side, we are on our way to seeing more stable and moderate price growth compared to the last few years where it strained everyone across Canada with the inflation rate.”
Ercolao says TD is predicting at least two more interest rate cuts by the end of the year. Earlier this week, Deloitte’s Economic Outlook Summer 2024 report predicted Canada wouldn’t see another interest rate cut until the fall and that B.C.’s economic growth would remain weak for the time being.
The Bank of Canada’s next interest rate announcement is slated for July 24.
-With files from Michael Williams