After a slow start to 2017, B.C.’s housing construction sector made up ground in March with the strongest pace of housing starts since September.
B.C.’s urban areas climbed to a seasonally adjusted annualized rate of 44,725 units, after averaging 27,000 units during the first two months. The Vancouver census metropolitan area (CMA) was the key contributor to the absolute gain, but the strongest relative increase was in Kelowna, where starts more than doubled.
While housing starts are volatile due to the indivisibility and sporadic nature of apartment and townhome projects, which make up more than 70% of starts, March was a catch-up month after a weaker-than-expected start to the year.
Year-to-date urban-area housing starts were down 18% for the first quarter compared with starts a year ago. As can be expected, multi-family construction was the key contributor with a 20% decline, while single-detached construction fell 14%.
Housing starts in the Vancouver CMA were down 25%. Most urban areas posted fewer starts from same-period 2016.
2017 housing starts are forecast to reach 36,500 units, down 13%, following a 33% surge in 2016. This will still mark a high pace of activity, underpinned by a growing population and strength in the economy and lack of inventory in large urban markets.
Meanwhile, B.C. manufacturing output eased in February, reflecting declines in exports during the month. Total sales fell for a third straight month, dipping 1.7% from January to a seasonally adjusted $3.85 billion. While year-over-year sales growth remained healthy at 5.9%, the underlying sales trend appears to have crested.
The principal drag was lower wood-product manufacturing, which contracted 5.8% from January and contributed to about two-thirds of the monthly decline. This was a third straight decline and aligned with lower softwood lumber exports to the U.S. Producers have likely curtailed production due to imminent softwood lumber duties, which will likely be retroactive to early 2017 for some producers.
Weaker momentum continued for machinery shipments and chemical goods while transportation and equipment shipments retraced after a January surge.
Year-to-date manufacturing sales remained solid at 5.2%, but momentum is expected to ease. The favourable Canadian dollar and growth in the U.S. economy are positive demand drivers, but forestry will likely drag. We forecast real manufacturing output growth in B.C. of 1.8% for 2017 and 2018, down from more than 4% in 2016. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.