Victoria primed for economic upswing

Conference Board of Canada report predicts growth of 3.2 per cent

By Andrew A. Duffy, Times Colonist

Buoyed by increased construction activity, manufacturing output and a housing market that continues to show strength, Victoria is poised to see its economy grow 3.2 per cent in 2010, according to the Conference Board of Canada.

Vancouver topped all Canadian cities with expectations its economy, basking in the afterglow of the Olympic torch, would expand by four per cent this year.

"The Olympic Games provided a big, even if temporary, boost to retail trade, arts, entertainment and recreation, accommodation, and food services in Vancouver. All in all, the Olympics injected about $600 million into the Vancouver economy, lifting growth by about 0.8 percentage points," said Mario Lefebvre, director of the Conference Board's Centre for Municipal Studies.

In its spring Metropolitan Outlook, the board noted construction activity in Victoria, which declined by 9.1 per cent in 2009, will drive the rebound as it is expected to bounce back with a 35 per cent increase in housing starts and continued commercial activity to drive construction growth to 3.1 per cent.

"Construction began on just over 1,000 new homes last year, down from 2,600 units in 2007, but with the economy on the mend and mortgage rates low, new home construction is poised for a moderate comeback this year," the board said. It estimates housing starts will reach 1,400 this year and continue to rise until they hit 2,300 in 2014.

But it seems construction is off to a bit of a slow start.

According to Statistics Canada yesterday, the value of building permits in Greater Victoria was down 55.3 per cent in February compared with February 2009. Victoria's municipalities issued permits valued at $53.6 million in February down from the $63.7 million issued in January and well off the $119.8 million issued in February last year.

The Conference Board report noted the services sector will also rebound as domestic demand returns.

The board suggested personal income growth will boost consumer spending, lifting output growth in the wholesale and retail trade sector to 5.7 per cent.

The report seems to accurately reflect the experience on the street in Victoria, according to Business Victoria CEO Ken Stratford.

"I expect a strong rebound will come, though 3.2 per cent sounds a little optimistic," he said. "Still, I'm sure that it will eventually. I have been saying if this is as bad as [the recession] got it's not that bad, and I think we're well on the road to recovery."

Stratford is keen to see the unemployment numbers for March, which Statistics Canada will release tomorrow, to see if the improving economy is starting to have an effect on the jobless numbers.

"I'm looking there to really see the recovery," Stratford said, noting he expects the Victoria unemployment rate will start to trend down to reflect the increase in business growth.

Greater Victoria's unemployment rate edged down slightly in February to 7.5 per cent, a decrease of 0.1 per cent from January, though that was more than double what it was two years ago.

Stratford said he is starting to see "dots of light appearing" in the economy, notably in the high-tech and gaming sector, and expects the unemployment rate to get as low as 5.9 per cent by August.

The local high-tech sector has certainly found its feet following a lull last year.

"Things have been going well and we're seeing increased confidence among our membership," said Dan Gunn, executive director of the Victoria Advanced Technology Council. "It's a good sign when they are willing to invest in people, in sales and marketing and processes and efficiencies within the companies."

Gunn said the indications are 2010 will be a year of decent growth for the sector in Victoria.

"It has been poised to rebound since the fourth quarter of last year," he said, noting companies who have diversified their markets will rebound faster.

"If their customer base is strongly tied to government revenue then they will have a tougher time because there's so much restraint required in that area," he said, noting the same holds true for those squarely focused on the slowly recovering U.S. market. "The ones exploring Europe and Asia are having a better time of it."

The Canadian Federation of Independent Business is getting a more cautious outlook from its members.

According to the CFIB's monthly business barometer, B.C. business confidence level has dropped and now lags behind the national average for the first time since September 2009.

B.C. ranked fifth in Canada with a barometer index score of 68, while national business confidence has increased steadily in recent months and now stands at 69.9, its highest level in five years.

According to the barometer, insufficient domestic demand and the shortage of skilled labour remain the main business constraints for B.C. businesses, while taxation and regulatory costs are their major cost constraints.

The vast majority of B.C. businesses, 79 per cent, say the overall state of business is either good or satisfactory.

"Short of any wildcard, we are well on our way back to a good strong recovery," said Stratford.

aduffy@tc.canwest.com
© Copyright (c) The Victoria Times Colonist