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 - Apr 12, 2012

Alex Carrick
Canada’s Trade Surplus in February Declined but Business is Optimistic

In February, Canada’s merchandise trade surplus with the world returned close to zero ($3.5 billion seasonally adjusted and annualized), according to Statistics Canada.

Only two months earlier, it reached a post-recession high of +$34.3 billion.

Canada’s trade surplus with the United States also fell back somewhat in the latest month, to $57.7 billion from its post-recession peak of $72.7 billion in January.

The U.S. in February imported less (-2.7% month over month) while exports remained about the same (+0.1% month to month).

The drop in U.S. imports was probably a reflection of less consumer demand for products coming from offshore.

Given the improvement in the auto sectors north and south of the border, we know that manufacturing in this country is receiving a boost from heightened demand for some products in America.

Certainly Canadian business has become more optimistic about the economic outlook and an improving U.S. economy is part of the equation. 

Hopefully, the decline in Canada’s merchandise trade balance will be a relatively temporary phenomenon.

The Bank of Canada (BoC) publishes a Business Outlook Survey every quarter.

Regional BoC staff members interview top management in about 100 firms in Canada, chosen to represent the make-up of the nations’ gross domestic product (GDP).

The resulting report has proven to be a good gauge of business sentiment

The latest findings are generally quite optimistic.

The answers to a number of questions are presented in “balance of opinion” format. This concept may sound complicated, but it’s really quite elegant in its simplicity. 

The “balance of opinion” is the percentage of respondents who answer in the affirmative to a question versus the percentage who respond negatively.

The neutral or stand-pat position is ignored.

The BoC says the spring survey results are more upbeat than what was recorded three months ago.

The most dramatic turnaround was in the balance of opinion on future sales growth. This measure went from slightly negative in the winter survey to +35% this spring.

The actual percentage responses were 58% expecting better sales results over the next 12 months (versus the previous 12 months), 23% anticipating worse – yielding the net figure of 35% – and 19% staying the same.

Besides the improving economy south of the border, the world economic and financial situations have taken turns for the better, according to business leaders. These are the reasons behind the better sales forecasts.

As for future employment, the “balance of opinion” remained quite positive. This indicator has been above 20% for nearly three years dating back to the summer survey of 2009.

The percentage of respondents expecting to hire more staff over the next 12 months was 55% versus only 12% planning cuts (for a net of 43%) and 33% staying the same.

On the question of machinery and equipment investment, the “balance of opinion” stayed strong at 24%. That’s the net result from 43% of firms indicating they will increase their M&E expenditures over the next 12 months, while 22% will pull back.

The section on investment may contain the most important line in the report. The direct quote is: “Many firms reported that their investment spending remains focused on ways to reduce costs and raise productivity.”

That is either a dead-on recognition of the challenges faced by the Canadian corporate sector or a not so subtle insertion by the Bank of Canada of what it thinks is most important.

On the subject of costs, the balance of opinion was mildly positive that input prices will increase faster over the next 12 months (23% versus 16% for a net figure of 7%) than during the previous similar time frame.

However, it should be emphasized that the majority of firms (61%) expect input prices in the year ahead will increase at about the same rate as over the past 12 months.

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

05/04 - U.S. Employment Rose by a Mediocre 115,000 in April
04/27 - U.S. GDP +2.2% in Q1 2012 and Alberta led Canadian Provinces in 2011
04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates
04/03 - A Tale of Two Budgets
03/29 - A strong year for new construction investment intentions in 2012
03/21 - Leading Indicator Series Add to Good News about the U.S. and Canadian Economies
03/06 - Three key trends, more forays into high-tech and the importance for construction
02/29 - Two important sources of strength: share prices and non-residential construction
02/22 - Home resale market may be picking up in the U.S. while flattening in Canada
02/16 - Good news on U.S. housing and employment is positive for Canada as well
02/08 - Home starts and job levels diverge in Canada and the U.S.
02/03 - Canada’s labour market flat in January but U.S. on a roll
01/23 - Canada’s leading indicator series continued to charge ahead in December
01/12 - 2012 holds promise but there’s no denying the uncertainty (part 2)
01/11 - 2012 holds promise but there’s no denying the uncertainty (part 1)
01/04 - How stock prices have performed depends on the timing of the data points
12/22 - Canada stands firmly in the middle of the road as it enters 2012
12/14 - Trade issues climb the agenda in both Canada and the U.S.
12/05 - Finding Fault with Canada’s Carbon Footprint is Absurd
11/23 - Mixed-to-slightly-positive Messages on the U.S. Economy

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