One could have expected the worst. The public prognostications at the end of 2008 coming from Helmut Pastrick, chief economist at Central 1 Credit Union, left more than a few people with hangdog looks.
And in a private round-table discussion, he offered the opinion that commercial real estate might be holding its own, but that it was a lagging indicator of economic health. Just wait a year, he said with ever so slight a sardonic grin, suggesting that even this ray of hope would be dimmed in 12 months’ time.
The worst recession since 1982 induced negative growth in B.C.’s economy in 2009, but by year’s end it was hard to tell what, if anything, had changed. While unemployment averaged 7.6 per cent, up from 4.6 per cent in 2008, the housing market roared back. Investors were once more buying and selling properties and office vacancies were showing signs of falling back from their recessionary highs.
Much like the H1N1 flu pandemic, the economic meltdown was generally anticipated but largely avoided by the province, leaving some to wonder if it was ever really a threat. B.C.’s self-confidence was intact, buoying it into a Winter Olympics that saw the greatest outpouring of civic spirit in a generation. The real bubble wasn’t necessarily the one everyone feared in the housing market but the one surrounding the province as it floated through trouble virtually unscathed.
Aggregate revenues for this year’s Top 100 companies totalled just short of $120.5 billion, compared to $126 billion on last year’s list, for a 4.3 per cent drop – slightly greater than the 2.3 per cent decline in the province’s GDP.
But many of B.C.’s biggest companies are global players and feel a limited impact, if any, from local economic circumstances. A bigger factor is currency exchange rates. The U.S. dollar rose eight cents against the loonie when annual averages are compared, but spot rates over the course of 2009 swung approximately 30 cents, challenging companies working internationally to maintain cash flow. While a mere 15 companies on the list report in U.S. dollars, the number with exposure to the U.S. dollar is far greater thanks to their trade in gold, lumber and other commodities.
You may receive funds in Canadian dollars, but the amount of Canadian dollars you receive is still dependent on the U.S. dollar price of that asset,” explains Brendan McGrath, manager of business solutions and a senior foreign exchange trader with Custom House, a Victoria foreign-exchange company that was acquired last year by Western Union Holdings Inc. “So even if these companies are never actually exchanging physical foreign exchange, they still have very large exposure to the U.S. dollar because their commodity is priced in U.S. dollars.”
Retrenching in the U.S. economy also affected demand for the products lumber companies and others provide, further dampening revenue, although McGrath says emerging markets have been picking up some of the slack.
Looking back on the year, Helmut Pastrick says it bodes well for the future. He calls it a turnaround, but then steps back and qualifies his optimism: “It’s setting up for the turnaround.”
While many sectors started to rebound in the latter half of 2009, which mitigated shortfalls earlier in the year, the real gains are most likely to be seen in 2010. “The recovery should expand, broaden out, and it already has and it will continue to do that,” Pastrick says. “It’s not straight up from here but certainly it will be a better year, 2010 versus 2009.”
