This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Construction Industry Forecasts

Notes from Alex Carrick - Mar 29, 2012

Alex Carrick
A strong year for new construction investment intentions in 2012

Statistics Canada’s Private and Public Investment survey is published in February of each year.

Covering 30,000 owners in the private and public sectors, it is the most complete record of investment intentions in the country.

The latest survey was conducted between October 2011 and late January 2012.

Because the figures are spending intentions, they are not directly comparable with CanaData’s starts statistics.

For any given year, they include the financial commitment for projects begun in preceding years, if the work is still ongoing.

They also include the dollars that will be spent in the current year on projects that have been newly initiated.

There is perhaps an even easier way to explain the numbers. They are the equivalent of annual progress payments.

Both construction and machinery and equipment are included in the survey, but this article will concentrate on construction only.

The dollar spending on new construction in Canada in 2012 is expected to be $281.7 billion.

That’s a figure that has not been adjusted for inflation – in other words, it’s in “current” dollars. 

Projecting Canada’s construction market out a little ways, the total value will more than likely exceed $300 billion next year. That will mean a doubling in the value of construction since 2004.

Construction has been one of the prime drivers of growth in the economy over the past ten years. There is every prospect – based on the very large inventory of upcoming resource projects that are underway or planned – that construction will continue to be one of the most dynamic components of Canada’s economy over the next ten years as well.

The percent change in total new construction in 2012 will be +8.0% versus 2011. That’s slightly faster than 2011’s increase of +7.0%.

The two standout sectors according to industrial categories will be: mining and oil and gas extraction (+18.0% in 2012 on top of +25.5% in 2011) and utilities (+16.4% in 2012 versus -4.0% in 2011). The utilities category includes sewers and watermains.

At 42%, mining and oil and gas extraction is by far the largest sub-sector within total non-residential construction.

The gain by manufacturing will be respectable (+9.2% in 2012, down from +31.3% in 2011), but it’s a category that’s only one-sixteenth as large as mining and oil and gas extraction.

Transportation and warehousing (+34.3% in 2012 versus +12.6% in 2011) and wholesale trade (+24.4% in 2012 versus +2.1% in 2011) will do very well this year, even though retail trade (+6.1% in 2012 versus +9.2% in 2011) won’t be nearly so bullish. 

Some sectors that are important for the construction industry will do only so-so. These include: public administration (+3.5% in 2012 versus -1.9% in 2011); health care and social assistance (+2.6% in 2012 versus -7.2% in 2011); and accommodation and food services (-1.6% in 2012 versus -12.5% in 2011). Roads and highways fall within the public administration category. 

The two sectors with the largest declines will be educational services (-10.3% in 2012 versus -8.6% in 2011) and finance and insurance (-18.7% in 2012 after +33.5% in 2011). The latter category is relatively small compared with almost all the other categories mentioned so far. 

What are some of the most notable regional changes? It’ll come as no surprise to anyone that Alberta stands out in mining and oil and gas extraction (+17.0% in 2012 in addition to +28.6% in 2011). Alberta will account for 60% of all spending in the sector nation-wide.

Also with large percentage increases in mining and oil and gas extraction this year, east to west, will be: Newfoundland and Labrador (+46.0% in 2012 versus +110.6% in 2011); Quebec (+58.8% in 2012 versus +17.9% in 2011); Saskatchewan (+14.6% in 2012 versus +5.4% in 2011); and British Columbia (+14.8% in 2012 versus +26.0% in 2011).

The leading regions for strength in utilities spending will be: Quebec (+18.1% in 2012 versus -6.1% in 2011); Ontario (+11.6% in 2012 versus -5.9% in 2011); Alberta (+26.3% in 2012 versus +17.2% in 2011); and British Columbia (+24.9% in 2012 versus +4.8% in 2011).

The largest percentage changes regionally in manufacturing will take place in Ontario (+19.9% in 2012 versus -9.7% in 2011), Manitoba (+9.2% in 2012 versus +95.3% in 2011) and British Columbia (+172.4% in 2012 versus +71.6% in 2011). 

As for some of the other categories, Ontario will perform well in retail trade (+9.1% in 2012 versus +13.8% in 2011), Saskatchewan will record a large jump in accommodation and food services (+111.2% in 2012 versus -16.8% in 2011), British Columbia will be especially strong in transportation and warehousing (+35.9% in 2012 versus +49.5% in 2011),  and Quebec will continue to be a leader in health care and social assistance (+8.4% in 2012 versus +13.3% in 2011).

As a final comment, it is interesting to note the mix between the public and private sectors when it comes to investment spending. This only becomes relevant in non-residential construction, since almost all housing investment is private.

The total value of public sector new construction in 2012 is estimated at $65.1 billion. The value of new non-residential private sector investment will be $116.1 billion.

Government will therefore account for 36% of the total, with the private sector making up the remaining 64%. In other words, in non-residential construction, the split is almost one-third public and two-thirds private.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.


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Read Other Recent Alex Carrick Posts

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