When a series of deep, resonating booms echoed across British Columbia in late summer, it wasn’t the typical mountain thunderstorms making the noise. Rather, it was the B.C. government beating political drums.

The loudest sound came in late August with the provincial government’s release of its latest quarterly Major Projects Inventory report, which showed that large-scale construction projects planned or now underway had surpassed the $100-billion threshold for the first time in the second quarter, ended in June. Specifically, the latest list’s 769 capital projects totalled $101.9 billion.

“With more than twice as many construction projects today, compared with just three years ago, the report shows investors’ continuing high level of confidence in B.C.’s economy,” Economic Development Minister Colin Hansen stated proudly.

But even though B.C.’s economy remains robust, Victoria’s use of this report for an opportunistic spin on the province’s economy did raise some eyebrows.

To begin with, most projects listed have been on the books for some time; a few even stretch back to the 1990s, when the NDP were in power. Only 71 of the 769 projects named have been added since the first quarter’s inventory, which ended in March. That’s reasonable growth, but hardly spectacular.

The inventory includes public and private projects with a capital cost of at least $20 million within the Lower Mainland and at least $15 million in the rest of B.C. But many projects are only on the drawing board, so completion isn’t guaranteed.

Beyond that, a significant part of B.C. construction is in the public sector to prepare for the 2010 Olympics or for public transportation projects, such as the almost 19-kilometre Canada Line rapid transit system in Greater Vancouver.

Private projects are a better indication of business confidence in a province. And the fact is that some of these projects may not move beyond the planning stage because signs of trouble ahead are beginning to surface.

The Business Council of B.C.’s latest economic index shows that the province’s economic growth moderated between the first and second quarters, primarily because of weaker conditions in key export-oriented sectors — such as forestry, which is beginning to feel the slowdown in U.S. housing starts.

In fact, B.C. economists are becoming increasingly worried about the state of the U.S. economy, because of both the drop in U.S. housing activity and the unstable geopolitical environment. The U.S. housing slowdown, in particular, is putting downward pressure on B.C. lumber prices.

Another key element is the worsening mountain pine beetle infestation. “The economic implications are considerable,” a recent B.C. report by the Canada West Foundation warns.

The strong Canadian dollar and higher energy prices are also beginning to hurt B.C.’s economy, but larger still are concerns over rising costs in construction and the growing shortage of skilled labour.

Recently, a senior secondary school in New Westminster, B.C., cancelled the building of new facilities due to rising construction costs — and this was after part of the old school had already been torn down.

Even Hansen now admits that construction costs, rising by more than 10% annually, are troubling: “I think it’s fair to say that every construction project in the province is facing rising costs that I don’t think people would have anticipated five years ago.”

Cost escalation has also hit the 2010 Olympic Winter Games; Ottawa and Victoria recently had to kick in another $110 million to cover construction overruns.

And despite Victoria’s fast-tracking apprenticeship programs, post-secondary education capacity and out-of-province recruiting programs, the shortage of skilled labour is worsening. Attracting workers is doubly difficult with red-hot Alberta next door.

Now, B.C.’s housing market is slowing as well. A recent TD Bank Financial Group report shows that, with the average resale house now priced at more than $500,000 in Vancouver, the market is beginning to turn. In fact, B.C. housing starts dropped by a surprising 21.2% in August from the previous month.

Most economic forecasts for B.C. call for growth in the 3%-4% range in 2006 and 2007, which is still healthy. But beyond 2007, economists are cautious. And they’re certainly not beating any drums. IE