December 11, 2002

Economic Performance - Reality vs. Forecasts

On the afternoon of July 30th, 2001, Gary Collins stood in the BC Legislature, delivered his fiscal update, and proclaimed that because of business confidence spurred on by tax cuts economic growth would be 2.2% in 2001 and 3.8% in 2002. On December 9th, 2002, almost 18 months later, BC's Ministry of Finance issued a news release that claimed "At 1.9 per cent for 2002, British Columbia has outperformed its independent Economic Forecast Council's 0.7 per cent forecast of last January." After being so wrong in his first mini-budget speech, Collins appears to have learned nothing. Once again Collins is counting his chickens before they are hatched.

Preliminary figures showing national economic growth for 2002 will not be released by Statistics Canada until February 28, 2003. Provincial figures for 2001 were not released until April 26, and they were substantially revised in November 2002. Don't expect to see preliminary provincial figures for 2002 until at least the end of April 2003. The Ministry of Finance's news release confused a revised economic forecast with actual economic performance. The revised forecast was up from the January forecast but still only half of the rate Collins predicted in his first big financial statement.

There is reason to believe 2002 will close on a down note for the BC economy. The November Labour Force Survey estimates of employment showed BC going in the opposite direction from the rest of the country. On its "positive economic indicators" website, the BC government had to lower its boast of job gains. The full picture of changes in employment over the past two years is shown in the following graph. Employment peaked at the time of the election. BC headed into what revised GDP estimates finally documented as a recession. Recovery was good in the early part of 2002 only to slow by year end. It is true that BC gained jobs between the low point of the 2001 recession and now, but it is also true that employment in BC today is the same as it was at the time of the 2001 election. Picking which past period to look at might be a matter of political spin, but forecasters have to worry about what lies ahead. The Second Quarter Financial Report released by the Ministry of Finance on November 28th said "After turning up in the first six months of the year, economic indicators in British Columbia were mixed during the July to September quarter." As shown in the graph, indicators for October and November have not made for a more rosy outlook.