Construction stakeholders attending the recent CanadaData East conference in Toronto were alerted to growth possibilities for their sector emerging from several different global sources.
Export Development Canada vice-president and chief economist Peter Hall told delegates in a presentation billed The World, U.S. and Canadian Economic Outlooks, that a strengthening United States housing market to be led by millennials would propel the whole U.S. economy forward.
The logic is this, said Hall: Housing starts is always a key indicator of economic health, and when the U.S. economy does well, Canada, including its construction sector, follows.
Statistics show, Hall said, the participation rate in the U.S. labour force among 25 to 34 year olds is showing a significant turnaround, with half a million to 800,000 recently entering the workforce.
"Parents of America, you are about to get your basements back," he said, referring to a seven-year period where millennials did not fully participate in the economy.
Hall feels there will be the rare generational phenomenon where a generation that has been held back will become first-wave consumers — spending on housing, automobiles and consumer goods — and that will energize the overall economy and get rid of a housing deficit that the U.S. has been experiencing for some time.
"In the U.S., the way that we add the market up, the amount of housing starts has been well below what’s needed just for the satisfaction of basic housing requirements, and that’s led to an enormous deficit," said Hall.
"Demand is very much ahead of the available supply in the U.S. market at the moment. So we are not just looking at the momentum from the 1.2-million units that they are constructing now to the structural 1.4-million units that are needed to keep this deficit from growing, it is actually going to go over, and it needs to stay there for a few years to clean this deficit up."
The housing market in this country is currently out of phase with that of the U.S., said Hall, so there will not be major housing growth fuelled by homegrown demand as in the States.
The Canadian supply did not need to correct as much as in the U.S. after the recession of 2008 so we were adding to a balanced situation when housing starts went up in the past nine years, and now Canada is in a surplus of housing.
But for constructors, he said, there is big news in other sectors, specifically the recovery in oil and gas, expansion in mines and strength in auto parts.
"This is an exciting story," he said. "With international trade firing up and commodity prices coming off of their extreme lows in 2016, we have an industrial sector inside Canada that is actually doing very well."
Then there is a traditional Canadian strength, agriculture, which will translate into a significant source of jobs for the construction sector, he said.
"The agri-food complex is incredibly exciting going forward," said Hall in an interview after his presentation. "Let’s just take pork in China, their net dependence on the rest of the world right now is growing at a rate of 15 to 21 per cent every year on a compound basis.
"Let those number sink in."
Canada as a "bread basket nation" is poised to profit, said Hall.
"We do things like pork," he said. "We have lots of crops here, we process foods here. So the demands of China and the emerging markets in general over the next 20 to 30 years are going to be extremely aggressive.
"And we believe construction is going to be needed for a long while to facilitate this growth."
Hall acknowledged there are a number of potential inhibitors to world growth in addition to North American uncertainties such as NAFTA. Growth in China is not what it once was, he said, but the Chinese economy is not as important to global economic expansion as the U.S. economy is.
Looking at Europe, there is uncertainty, Hall said, but the Canadian construction sector stands to benefit substantially from the CETA trade deal that officially went into effect on Sept. 21.
"The interesting thing is, growth is a great elixir," he said. "There is not a single one of these structural inhibitors that cannot be healed by a turnaround in global growth. We think that there is an aggressive wave of growth coming our way."
Summing up, Hall told the construction stakeholders that with the economy moving forward in the U.S., "The trade side is going to drive Canada and make your business prosperous."