B.C. manufacturing ramps up shipments

August was a stellar month for B.C. manufacturing momentum. Following a 2.4% increase in July, shipments jumped again in August by 2.1% to push sales to a seasonally adjusted $3.89 billion. Year-over-year shipments rose 8.1% from a year ago. B.C. exceeded a national gain of 0.9% during the month and a year-over-year drop of 1%. Commodity-related declines in Alberta and Newfoundland and Labrador, and transportation-related weakness in Quebec, were key contributors to the year-over-year national decline.

Year-to-date, B.C. sales climbed 3.3%, second only to Ontario. Key B.C. drivers included a 33% increase in primary metals and a 12% rise for wood products. Combined with food-related production, these sectors effectively drove all manufacturing gains from a year ago. In contrast, paper manufacturing sales fell 7.5% and were a key offset. The province’s manufacturing sector is benefiting from a positive environment for exports – namely a competitive exchange rate, mild expansion in the U.S. economy and, up until this month, the one-year grace period following the end of the expired softwood lumber agreement that allowed free exports to the U.S. There was a 5% increase in B.C. sawmill production through July, with physical export growth of 14% through August, mostly to the U.S.

While a competitive exchange rate and improving U.S. economy will underpin demand for B.C. manufacturing products, wood products are a risk to growth. Tariffs are likely in the months ahead.

Tourism activity in B.C. remained rock-solid in August. International tourist inflows remained consistent with July, easing by 0.2% to a seasonally adjusted 448,400 tourists. Visits by U.S. residents, after declining from a March peak (boosted by the World Rugby Sevens Series), have stabilized since June and trend at mid-2000 levels. Meanwhile the number of overseas visits fell 1.5% from July but remained near record highs.

Despite deceleration from earlier this year, a year-to-date gain of 11.5% underscores this year’s economic contribution from tourism. Year-to-date visits from the U.S. were up 10%, with a near 14% gain from overseas markets. China inflows climbed 16%, South Korea 15% and Taiwan 30%. Meanwhile, visits from Mexico and Australia rose 30% and 13%, respectively. A competitive Canadian dollar, rising demand for overseas travel and the perceived safety of Canada have likely all contributed to gains and should help elevate inflows over the next two years. 

Bryan Yu is senior economist at Central 1 Credit Union.