The historical records of Canada’s put-in-place capital spending numbers for residential, commercial, industrial, institutional and engineering construction are to be found in Statistics Canada’s on-line Cansim Tables 026-0013, 026-0016 and 029-0045.
Whereas construction ‘starts’ numbers are lump-sum figures entered at the time of groundbreaking, the ‘put-in-place’ data series are meant to mirror progress payments as projects proceed.
The history in those previously mentioned Cansim Tables, however, currently stops at 2017. But there is another source for 2018 estimates – the non-residential Capital and Repair Expenditures (CARE) survey.
There’s a problem, though. The 2018 data from CARE is set out according to capital spending by industrial sectors. These is no re-arrangement of those amounts according to the five type-of-structure categories.
Estimates or approximations can be derived, however, by employing the following logic.
Particularly relevant for commercial construction are the spending intentions by the ‘retail’, ‘financial’, ‘real estate’ and ‘accommodation’ industrial sub-sectors.
Particularly relevant for industrial construction are the new plant facilities that manufacturers are intending to initiate.
Particularly relevant for institutional construction are the plans of ‘educational’ and ‘health’ authorities.
As for heavy engineering/civil construction, ‘public administration’ dollars go towards roads, highways and bridges; ‘utilities’ spending is traditionally on sewers and watermains, natural gas distribution systems and electric power generation and transmission projects; and ‘transportation and warehousing’ firms funnel substantial funds into big oil and gas pipelines.
In summary, the numbers for key industrial sectors in each province or region provide guidance as to the 2018-over-2017 percentage changes for each major category of construction.
The 2019 to 2021 numbers in the tables accompanying this report are ConstructConnect’s forecasts based on population change; labour market strength; gross domestic product (GDP) growth; prospects for world trade; the movement of commodity prices; and interest rates.
Additional guidance was provided by graphing the data series and fitting regression trend lines to the curves.
Some of the key demographic and economic influences bearing on the projections are discussed in the following bullet points.
Population Growth:
- One key driver of construction activity is population growth.
- With respect to population increase, Canada is the leader among G-7 nations.
- Canada’s latest 12-month population gain was +1.3% (the U.S. was +0.7%).
- Canada’s nominal increase in population over the past year has been +470,000 people; Ontario at +226,000 has accounted for nearly half of that total.
- A jump of 470,000 residents is the equivalent of a new city the size of Halifax every year.
- Among provinces, Ontario’s population has been growing the fastest, +1.6% year over year (y/y); second-place belongs to Manitoba, +1.5%.
- Saskatchewan, Alberta and B.C. have each managed population growth rates matching the national average, +1.3%; Quebec’s advance has been +1.0%.
Interprovincial and International Migration:
- Alberta used to be the main destination for interprovincial migration; now it’s Ontario.
- ‘Net’ immigration (i.e., immigrants less emigrants) of +359,000 accounted for ¾ of Canada’s total population increase last year.
- The total number of foreigners landing on Canada’s shores, though, was +406,000 − augmenting the immigrant count are non-permanent residents (NPRs).
- NPRs include refugees and individuals with temporary worker status.
- The impressive population gains will continue to support residential, institutional and engineering (highways, roads, bridges, sewers and watermains, etc.) construction.
GDP and Employment Growth:
- Canada has also been a G-7 leader in terms of gross domestic product (GDP) growth.
- Canada’s y/y GDP in 2017 was +3.0% (the U.S. increase was +2.3%).
- The main reason foreigners want to come to Canada is good-jobs potential.
- With Washington turning less sympathetic towards immigration, Canada is gaining a significant advantage.
- Canada has a better shot at attracting the best-educated prospects from around the world to be employed in the high-tech sector.
- The relatively low unemployment rate in Canada, along with modest earnings improvements, will continue to drive consumer spending.
- Acting as a consumer spending restraint, while also having negative implications for housing affordability, is the outsized level of family debt in Canada (over 160% expressed relative to disposable income).
Office Vacancy Rates:
- Thanks to steady improvements in office-based employment, office tower vacancy rates in some major Canadian cities have fallen quite low.
- As calculated by CBRE, five cities in Canada have downtown office vacancy rates that are less than 10.0%: Toronto, 3.7%; Vancouver, 5.0%; Winnipeg, 8.8%; Ottawa, 9.5%; and Montreal, 9.7%.
- Downtown office vacancy rates in Alberta’s two pre-eminent census metropolitan areas (CMAs), Edmonton and Calgary, however, remain elevated, 27.7% and 18.7% respectively.
- The national office vacancy rate, based on 10 major cities across Canada, is currently 11.1% (the comparable U.S. figure is 10.7%); the national office vacancy rate in the suburbs of Canada is 15.3% (the comparable figure south of the border is 14.2%).
Knowledge-based Sectors and Millennials:
- Canada has been making great strides in ramping up activity and employment levels in knowledge-based sectors − and those new jobs require office space.
- The nature and location of much future construction activity will depend on the accommodation choices made by millennials as they increasingly form families and rise through management ranks – Will they congregate in the suburbs like their parents did or opt for more bustling scenes and shorter commutes?
Industrial Capacity Utilization Rates:
- Canada’s Q4 2017 industrial capacity utilization rates were exceptionally tight (above 85.0% signals a greater likelihood of an expansion of facilities).
- Total Canadian industry is now at 86.0% of capacity (the U.S. is at only 78.1%); Canadian manufacturing is at 86.1% (U.S. manufacturing is at 76.9%).
- Eight out of 23 Canadian manufacturing sub-sectors are operating with usage rates near 90% or higher: chemical products, 88.1%; textile mills, 89.9%; machinery, 90.2%; petroleum and coal products, 92.9%; plastic products, 93.5%; wood products, 94.5%; paper, 95.3%; and rubber products, 96.2%.
Government Initiatives, Positive and Negative:
- The Trudeau federal government in Ottawa is committed to a major infrastructure improvement program; a brand-new Infrastructure Bank has been established to facilitate this effort.
- But there are other government initiatives, federally, provincially and at the municipal level, that are diminishing incentives to invest in Canada.
- Requirements governing mortgage approvals have been tightened nationally.
- In Ontario and B.C., foreign buyers of residential real estate are facing surcharges.
- In B.C., financial penalties have been launched to discourage the practice of allowing properties to stand vacant (i.e., to reduce home-buying that is merely for speculation).
- Ontario, Alberta and B.C. have been legislating minimum wage hikes.
- Cap and trade programs or carbon taxes are adding to the cost of doing business in Quebec, Ontario, Alberta and B.C.
- Even when utilities are granted go-aheads for major delivery projects, there are no longer assurances that the work will proceed (e.g., additions to crude oil pipeline capacity from Alberta to the Pacific Coast).
- On the plus side, Quebec’s provincial government has straightened out long-standing financial woes and is operating under a balanced budget.
Canada-U.S. Tax Environments:
- With wide-sweeping changes underway, the corporate tax regime south of the border has become more favorable than in Canada.
- Also, U.S. firms operating overseas have been granted a reprieve if they repatriate their large cash holdings.
- Those sums may go towards share buybacks or dividend increases, but if they are earmarked for capital spending, such investment will take place at home rather than in Canada.
Loonie-Greenback Exchange Rate:
- The lower-valued ‘loonie’ relative to the ‘greenback’ is an incentive for foreign investment in Canada – not only does it render the cost of such investment less expensive, it also makes the currency-converted price of the resulting output cheaper when it is sold as an export product into the U.S. marketplace.
- The future CAD-USD exchange rate will depend on: (1) the degree to which world trade improves and internationally-traded commodity prices pick up (e.g., the Canadian dollar usually receives a lift from a rising crude oil price); and (2), on relative interest rates north and south of the border − the Federal Reserve has been acting more ‘hawkish’ than the Bank of Canada to this point in the expansion.
NAFTA and Tariffs:
- There are concerns about the survival of the NAFTA agreement, or about what form NAFTA-2 might eventually take.
- A heightened U.S. protectionist stance, in the form of tariffs or quotas, against some of its other major trading partners will inflict collateral damage on Canada.
- Any slowing of world trade will affect sales and shipments of Canadian raw materials.
- Canadian goods being shipped to the U.S. to become components in U.S. products intended for export will also suffer a setback.
With this article are 14 tables showing historical and forecast figures for put-in-place construction in Canada. There are breakdowns regionally and by type of structure.
Seven of the tables (i.e., the ‘a’ series of tables) are in ‘current’ dollars. The other seven tables (the ‘b’ series) are in ‘constant’ dollars. ‘Constant’ dollars are ‘current’ dollars adjusted for inflation.
‘Constant’ dollars capture volume changes as opposed to changes due to price variability.
The simplest way to point out the relationship between ‘current’ and ‘constant’ is to explain that when the numbers in the seven ‘a’ tables are divided by appropriate price indices, they yield the corresponding (i.e., by location and type of structure) numbers in the seven ‘b’ tables.
View the complete Canadian put-in-place construction forecasts in PDF format.
To view the Canadian put-in place construction forecasts by sector in PDF format, please click on the individual links:
All new construction by region
New residential building construction by region
New non-residential building (ICI) construction region
New commercial building construction by region
New industrial building construction by region
Recent Comments
comments for this post are closed