2014 Economic Review and 2015 Outlook
2014 saw strengthening of the regional economy, though the outlook for 2015 is uncertain.
Kimberley enjoys modest growth in 2014, strong foundations for 2015
Tourism surged in 2014, resulting from good Winter ski conditions and 26% growth in the number of festivals and events in the community. The additional hotel room tax collected on accommodations purchased in Kimberley from September 2013-2014 was up 10% up over 2013-12.
Weddings booked at the Conference Centre and the Kimberley Alpine Resort have grown an impressive 400% since 2011, doubling every year since then. Events at the Conference Centre grew 20% in 2014/2013, for a total of 83 events in 2014 and 39% growth in the number of delegate days since 2011.
Continued momentum of events such as First Saturdays and the addition of a weekly seasonal downtown Farmer’s Market were complemented by several new ski racing events and six new trails-based events. Calculating the overall impact of these activities in the community is difficult because it requires a precise understanding of participants’ origins and consumption behavior. However it is clear that festivals and events benefit the community through spends on accommodation, food and beverage, entertainment activities, and retail.
Kimberley’s profile in the digital market continues to grow. Unique visits to the municipal website grew to over 67,000 in 2014, 50% more than 2013, and 312% more than 2011. As well, SunMine.ca has seen over 12,000 unique visits. Efforts to leverage SunMine will increase once the facility is operational through online video content, in partnership with Tourism Kimberley.
Tourism Kimberley has seen solid growth in its online presence, which benefits the community through direct visitation as well as spinoff investments that result from the introductory tourism experience. Tourism Kimberley drew 35,000 unique visits in 2014, 40% more than in 2013. Kimberley saw over 25,000 visitors through the Visitor Centre in 2014, which has remained constant the past few years. Passenger traffic at the Canadian Rockies Airport just South of Kimberley was 128,941 in 2014, up 10% over 2013.
In 2015 tourism will benefit from a lower Canadian dollar, which has hit 5-year lows, but will likely be challenged by the negative impacts of $50 oil on visitors from Alberta.
While the overall value of building permits has not yet reached pre-recession levels of 2008, the construction industry has been remarkably consistent in recent years, with 14 new residential builds in each of the past four years.
Acquisition of, renovation to, and the emergence of new businesses in downtown buildings highlights an improvement in perceptions of the business climate. This trend is evident in the 2013-14 Survey of Kimberley Businesses and the 2014 Secret Investor Assessment.
Growth in the number of business licenses continued in 2014 with 60 new licenses making up 12% of the 495 total, while the year over year growth in overall business licenses moderated from 8% growth in 2013 to 0.8% in 2014. In 2014 20% of businesses licensed to operate in Kimberley were non-residents. Currently the business licensing system does not capture many home-based businesses.
BC and East Kootenay Regional outlook
Regionally activity in the resource sector continues to be challenged by lower prices for metals, minerals, and coal. However several large capital projects have the potential to proceed, including the Jumbo Glacier Resort ($900 million), Teck’s water treatment facilities in Sparwood ($600 million), the Bingay Main Coal Project ($480 million), and Phase Two of Teck Coal’s Line Creek Mine ($140 million). These projects promise to generate substantial employment in the trades and the economic benefits are likely to benefit the entire East Kootenay Regional District through a regionally mobile workforce.
The decline of the Canadian dollar makes local goods and services more competitive and should help to stem the tide of cross border and online shopping from the USA. Forestry, transportation, and retail are among the sectors likely to benefit from lower oil because these sectors rely on gasoline for transportation.
However development of the Liquefied Natural Gas (LNG) sector in BC could be affected by cheap oil. Many of the companies considering LNG investments are integrated energy producers and lower oil prices will affect their cashflow and ability to finance LNG.
BC growth is forecast to be solid over the next two years, at just over 2.5%.
The economic outlook for Alberta has deteriorated over the past several months with the decline of oil prices.
According to economists, global oil supply has been growing steadily over the past several years but various conflicts in the Middle East kept supply lower and prices artificially high. The results of the fracking revolution and increased shale oil production became apparent by September 2014 when the Organization of Petroleum Exporting Countries decided not to reduce their output to maintain price. The resulting oversupply will likely be reduced over the next year as the energy sector sees the shutdown and acquisition of high-cost producers who cannot survive in the current market. Demand for oil is not changing quickly and the Conference Board of Canada anticipates the price of oil will return to $80/barrel by 2016, where it will level off.
With the price of oil now around $50 a barrel the Alberta energy sector will be challenged in the short-term, causing ripple effects in regional consumption of goods and services such as tourism. The effect of this oil price is not likely to affect existing production but it will affect producers’ cashflow, restricting their ability to finance exploration and new construction. More significant for Alberta in the long-term remains their ability to transport heavy oil to tide water and realize a global price.
In 2015 Alberta will be in a holding pattern, with economic growth close to 0% forecast.
National and Global Outlook
Growth of Canadian Gross Domestic Product will continue to hover around 2% for the next 1-3 years. Fiscal restraint is predicted to continue at all levels of government. Business investment remains weak outside Alberta. Exporters, which includes the tourism sector, will benefit from a lower Canadian dollar. January 21, 2015 the Bank of Canada dropped the overnight rate, through which it lends to Commercial banks, by 0.25% as “insurance” against downside risk to inflation – in other words to encourage economic activity. While Canadian banks have signalled they may not follow suit by decreasing consumer lending rate, this will drive further devaluation of the Canadian currency via the bond markets, improving the competitiveness of Canadian exports.
The American economic recovery is picking up steam and GDP is forecast to grow at 3%. This will benefit the regional forestry industry as well as encourage American tourists to venture North. With the American economy approaching full employment there is speculation that American interest rates will rise in the 3rd or 4th quarters of 2015, reinforcing the relative devaluation of the Canadian dollar.
Growth in China has stabilized at 7% in the near term, while growth in India and Brazil has slipped, but all are likely to benefit from lower energy prices. Russia taken a serious hit from the decline in oil and is on the verge of recession. Trouble in the Middle East may not be far off as many OPEC nations who subsidize the cost of living are likely to face the prospect of reducing welfare programs and civil unrest as the decline in oil slashes government revenues.
The European Union is emerging from recession but uncertainty abounds. Deflation has begun to appear in several countries; sovereign debt levels remain high and their effects on financial markets remain a concern.
GDP forecasts are taken from the Conference Board of Canada’s December 2014 Business Outlook series unless otherwise noted.