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Province expected to take a turn for the worse compared to most other provinces in the coming year
Falling retail spending will lead to significant challenges for B.C.’s economy over the next year, says a TD Bank economic forecast released on Monday.
“In recent months, cracks have been seen in both consumer spending and labour markets,” the report read. “B.C.’s economy is expected to take a turn for the worse compared to most other provinces in the coming year.”
“Nominal retail spending in the first quarter slipped over five per cent annualized, with an even deeper contraction posted in inflation-adjusted terms. With B.C.’s households facing the highest average debt burdens in the country, the financial squeeze from the Bank of Canada’s steady tightening campaign is becoming increasingly evident.”
The report said B.C. businesses have responded to the reduced retail spending by reducing hiring.
“Job growth in the January-May period slowed to a more pedestrian 1.5 per cent, below the national pace. In the coming quarters, we’re expecting a further flattening in employment gains to collide with continued relatively brisk labour force growth, pulling up the province’s unemployment rate to 5.5 per cent by late 2023. In that environment, the pace of average wage gains are likely to slow.”
The drop in wage gains will play a role in controlling the province’s inflation rate.
The bank also noted a 10 per cent jump in average house prices in B.C. over the past year, though it expects that to taper off in the last half of 2023 and into 2024. The bank also forecast the Bank of Canada to raise rates again in July.
Construction activity is also expected to contract by six per cent, despite a burst of activity related to the development of the Kitimat LNG project.
The report noted the B.C. government is set to increase spending by eight per cent, the highest among all provinces.
“Housing affordability measures carry a $1.1 billion tab. The government will also make permanent increases to the climate action tax credit and enhancements to the B.C. family credit,” the report read.
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