If the latest statics are to be believed, it appears that while the recovery in the United States construction market has tapered off, the Canadian recovery continues to go from strength to strength.
Canadian residential investment values topped $27.6 billion in the June quarter this year – easily a high-water mark in any quarter in recent times. That figure represented more than a 10 per cent rise compared to last year.
To be sure, there are negative signs; though activity is rising in most segments of the market, a disproportionate share of the gain is coming from apartment building projects, where activity has nearly doubled over the past two years.
Furthermore, there are reports that Toronto’s super-hot market for condominiums has peaked following the introduction of tighter lending requirements in June. In any case, with only moderate economic growth expected over the near term, the building industry expansion rates of the past year will almost surely not be sustained over the longer term.
Furthermore, while the residential numbers were strong, the latest seasonally adjusted figures for non-residential construction indicate that conditions in this segment of the market remain flat.
Still, there is a lot to like about the residential figures, especially with every single region except for Nunavut having recorded year-over-year gains in the past quarter.
Moreover, building permit data of late has shown a marked pickup in both residential and non-residential building, meaning that the pace at which new work is coming in has picked up.
While the figures for Canada remain impressive, those coming out of the United States are mixed.
To be sure, with the overall dollar value of residential and non-residential construction activity in the month of July up 9.3 per cent from last year, the industry is in a much better state than it was 12 months ago.
Still, a seasonally adjusted slip of 0.9 per cent during the month of July indicates that for now at least, the industry is taking a pause.
Going forward, the immediate outlook varies for different sectors. In residential building, strong authorization numbers (up by more a one quarter from last July) indicate that a 1.6 per cent dip in residential construction investment during the month of July is likely to resemble a temporary pause that will probably not last long.
The outlook is different, however, in non-residential construction. Last month, a survey of non-residential building contractors by Associated Builders and Contractors indicated sharp declines in sales expectations, profit margins and staffing levels. A dip in recent months in private sector investment, which will need to pick up the slack in coming years given fiscal pressures on public sector investment, is concerning.
For now, conditions for the Canadian building industry are strong, even as the country’s neighbour to the south has taken a pause.