Market Update: Floods Exacerbate Supply Chain Issues

Torrential rain caused major flooding in parts of the province last week. Mudslides, triggered by the heavy downpours, also destroyed sections of major highways, cutting off the Lower Mainland from the rest of Canada.

While it will take time to count the cost of the devastation, we expect both short- and long-term effects to be felt in the local economy.

Supply Chains

Every major highway connecting the Lower Mainland with the rest of the country has been cut off, adding disruption to already strained supply chains. Road closures have a knock-on effect for goods moving through the Port of Vancouver and put added pressure on rail line operators.

The extent of the damage, coupled with the onset of winter, means it could take months until affected highways are fully repaired.

Source: BC Government

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Business Disruption

The disruption caused by the flooding will hamper economic recovery at a time when businesses are desperate for some momentum to see them through the lingering Covid-19 pandemic. Although companies will always find ways of overcoming logistical issues, those solutions often come at an added cost.

People living in communities affected by the storms will need to take time off work to put their lives back together. This has a trickle-down effect for employers that are already struggling to cope with a dwindling work force. With businesses literally underwater, expect to see an increase in BC’s unemployment rate.

Agricultural Industry

Abbotsford and Chilliwack are important agricultural centres, responsible for producing a lot of BC’s dairy, poultry, and beef. Large areas of farmland, including livestock, machinery, and crops, have been decimated and it is not clear how long before they will start producing again.

Municipalities

The flooding will no doubt affect various BC municipalities’ capital infrastructure plans. Projects such as dams, bridges, and highway repairs will now be a top priority for local governments in affected areas. Given the scale of damage across the province, we can expect to see an increase in debt levels in the municipal space soon.

Tourism

The severing of road links will not only have an impact on the movement of goods around the province, but also people. Our ability to travel around the province will be affected, or at the least cost more. This is bad news for areas reliant on tourism. Resorts, which have had to contend with Covid-19 the previous two winters, could see visitor numbers further reduced as we enter ski season.

Silver Lining

While it may be difficult to find positives right now, this situation presents some opportunities. As bad as the flooding has been, it has highlighted significant faults in our infrastructure and emergency preparedness that need to be addressed.

As events like these become increasingly common, an adequate response plan is more important than ever. We hope that we can learn from this tragedy and rebuild and come back stronger than ever.

In the meantime, the provincial government recently launched The Disaster Financial Assistance program for those affected by the flooding and landslides.

Look out for upcoming Market Updates as we continue to update you on this situation.

Cash Management Group

604.643.0101 | Email us

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