When B.C. Premier David Eby campaigned in the lead-up to the province's October election, he touted how well B.C.’s economy was performing compared with peers.
That outperformance could be about to change.
BC Stats data shows B.C.’s real gross domestic product (GDP) grew by 2.4 per cent in 2023—faster than any other province.
Data for 2024 is not yet available but economists say a period of underperformance is likely to start in 2025.
Central 1 Credit Union chief economist Bryan Yu told BIV that B.C.’s economic outperformance is threatened by workers having completed large capital projects.
“Our GDP is about 11 per cent higher than pre-pandemic and the number for Canada as a whole is about six per cent,” he said to underscore how well the province has done, compared with counterparts across the country.
He listed the Site C Dam and LNG Canada’s project in Kitimat as two mega-projects that have created substantial employment and productivity in recent years.
Those initiatives are now largely complete.
The good news is that the projects will generate a bump in exports, and that will help B.C.’s economy, but that stimulus is not likely to equal the economic stimulus that the projects created when they were being built, he said.
Yu does not see any projects on the horizon that are large enough able to pick up the slack, although there will be capital spending on hospitals, SkyTrain extensions and other capital-works projects, he said.
The province needs those projects to keep its labour market steady.
B.C.’s unemployment rate rose 0.4 percentage points to 5.7 per cent in November, compared to the same month a year earlier. It then rose again to six per cent in December. Good news is that this is below the Canadian average of 6.7 per cent in December but the national unemployment rate is trending in the other direction. It declined by 0.1 percentage points, compared with the month before..
Private-sector job growth is a particular concern.
“The public sector continued to expand,” Yu said.
“Weakness in the labour market has been a private-sector-oriented story.”
He said he expects B.C.’s economy to expand by close to 2.5 per cent in each of 2025 and 2026, following what he estimated was more tepid GDP growth of 1.5 per cent in 2024.
“The labour market is forecast to generate employment growth of 1.5 to two per cent, with an unemployment rate below six per cent,” he said.
“However, risk remains to the downside, given the unknowns of U.S. trade policy,” he said, referring to U.S. President-Elect Donald Trump’s threats to invoke 25-per-cent tariffs on Canadian imports.
B.C.'s MInistry of Finance today released data to say that under four years of Trump's tariffs, B.C. could see a cumulative loss of $69 billion in economic activity between 2025 and 2028.
Trump tariffs could spark retaliatory tariffs against such products as orange juice, sinks, toilets, steel and other products, which could hurt B.C. consumers.
John Anderson, CEO of Coquitlam-based Oppenheimer Group told BIV that were Canada to levy a 25-per-cent tariff on all American fruits and vegetables, the net impact on Canadian consumer prices would be much less than 25 per cent.
Nonetheless, Trump shows no sign of letting up on his taunts that Canada would make a great 51st state.
When he was asked at a Jan. 7 press conference if he would use military force to annex Canada, he answered “No, economic force, because Canada and the U.S., that would really be something.”
Trump has complained that his country is “subsidizing” Canada various amounts per year—sometimes by US$100 billion, other times by US$200 billion —due to Americans buying more Canadian products than vice-versa.
It is unclear what all he is including in those calculations.
U.S. government data shows the U.S. ran a US$64.3 billion trade deficit with Canada in 2023. In the first 11 months of 2024, its trade deficit with Canada was almost US$55 billion.
This is not the U.S. government paying that money to Canada, however. It is U.S. importers and residents freely choosing to buy Canadian goods.
Regardless, that trade-balance disparity may be enough to aggravate a tariff-related trade war.
“This is not the talk of a friend and economic partner,” Yu said in a LinkedIn post. “If this is the next four years, Canada needs to diversify our energy and resource exports markets across the Atlantic and Pacific, increase internal trade and loosen barriers, increase skilled immigration and bulk up our military.”
Tapped-out consumer could hit B.C. economy
B.C.’s economy could face another hit as consumers pull back on spending.
Data indicates that B.C. consumers are reining in their spending more than counterparts across the country.
Retail spending in the province dipped by about 0.5 per cent in 2024, compared with 2023, with real per-capita spending down closer to 3.5 per cent, according to Statistics Canada.
That is weaker than most provincial peers, Yu said.
The country’s number cruncher found that, in December, B.C. restaurant revenue was growing at a far slower rate than in other large provinces. The province’s 2.67-per-cent growth was better than only Newfoundland and Prince Edward Island.
Given that this growth rate in dollars spent at restaurants was around the same as the rate of inflation during the year, there was little or no growth in the number of customers, or items ordered.
And consideration an increase in population, sales at restaurants were down on a per-capita basis.
Industry advocates, such as BC Restaurant and Foodservices Association CEO Ian Tostenson and restaurant owners such as Romers principal Kelly Gordon, told BIV that diners have learned to expect discounts.
The consumer mentality has shifted to be more focused on happy hours, they said.
Restaurants often become nearly empty when happy hours end, Tostenson said.
Lackluster spending on alcohol and cannabis provides more evidence that B.C. consumers feel tapped out.
Legal cannabis wholesales in B.C. in the quarter that ended in September increased by 7.4 per cent—the slowest rate seen in any of the 10 quarters for which the British Columbia Liquor Distribution Branch (BCLDB) has released data.
Alcohol wholesales have seen absolute declines in each of the past four quarters, year-over-year, up to September, according to BCLDB data.
Yu said he expects consumer spending to pick up in 2025 in part because “wage growth is robust.”
DIG360 principal David Ian Gray told BIV that consumers are more cost conscious than they were a year ago because of higher real price levels: The cumulative effects of years of higher-than-average inflation outpacing wage growth, even though that is starting to turn around.
While some consumers may be flush with cash and eager to spend it on items like Taylor Swift concert tickets, most B.C. consumers are feeling the pinch, he said.
The shift in sentiment is seen through indicators such as the Canadian Federation of Independent Business’ (CFIB) business confidence surveys.
The CFIB in November found B.C. small business owners were the least confident among owners in Canada that their ventures will perform better three months into the future.
They were also the second-least confident, after only Newfoundland, that their businesses will perform better in 12 months.
Those low confidence levels are particularly striking because B.C. small business owners historically tend to be more confident than counterparts in the rest of Canada, B.C.-based CFIB policy analyst Emily Boston told BIV.
