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BMO Bank of Montreal

December 07, 2011 09:30 ET

BMO Economics: Asian Export Demand Ensures Solid Growth in British Columbia

- Jobless rate falling sharply

- Strong growth in construction employment

- Real GDP growth of 2.4 per cent in 2011; 2.3 per cent in 2012 (Canada's at 2.3 per cent in 2011; 2.0 per cent in 2012)

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 7, 2011) - B.C.'s economy has cooled somewhat in 2011 and will moderate further in 2012, but will still outpace the national average as a result of demand from Asia, according to the Provincial Monitor report released today by BMO Economics.

"Growth is expected to moderate to 2.3 per cent in 2012, as residential construction and government spending cool and U.S. economic growth continues at a sluggish pace," said Robert Kavcic, Economist, BMO Capital Markets. "Still, barring a deeper global downturn, growth should be supported by strong Asian export demand and resource-sector investment."

The B.C. labour market is carrying some momentum into the end of the year, with the jobless rate falling sharply to 7 per cent from a high of 8.8 per cent in February. "Construction employment has seen strong growth of more than 27,300 jobs this year, offsetting weakness in manufacturing," stated Mr. Kavcic.

The lofty housing market has shown signs of cooling in recent months, particularly in formerly white-hot Vancouver. Additionally, there is uncertainty over the timing of the transition from the HST back to the PST/GST. "Housing starts should moderate to a pace of slightly above 23,000 units in 2012, down from an expected 26,500 in 2011," noted Mr. Kavcic.

The U.S. housing market has shown signs of leveling off in recent months, with homebuilder confidence improving. Still, housing starts will see tepid growth at best in the year ahead, providing little lift for forestry exports. At the same time, a cooling Chinese property market has dampened momentum from recently robust forestry exports to that region.

"Despite the moderating effect of the global economic climate, our commercial customers remain optimistic about their business prospects," said Derral Moriyama, Senior Vice-President, Commercial, Greater Vancouver District, BMO Bank of Montreal. "By upgrading their infrastructure and retooling their processes, our businesses are well-positioned to continue to enhance productivity, and to capitalize on trade opportunities with the increasingly important Pacific basin."

B.C.'s second quarter fiscal update increased the fiscal 2011-2012 deficit estimate to $3.1 billion (1.5 per cent of GDP) from the $2.8 billion Q1 estimate. Still, the Province remains committed to balancing the budget by fiscal 2013-2014.

The full Provincial Monitor can be downloaded at bmocm.com/economics.

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