Current dollar spending on new construction in Canada will be $219 billion in 2008, rising to $227 billion in 2009, $239 billion in 2010 and $262 billion in 2011, according to the latest put-in-place investment forecasts made by Reed Construction Data — CanaData. The year-over-year percentage changes in current dollars will be: +5.0% in 2008 (versus 2007); +3.8% in 2009; +5.4% in 2010; and +9.7% in 2011.

Constant Dollar Spending will be more Restrained at First
However, the year-over-year percent changes in constant dollars will be quite restrained at first (-0.8% in 2008 and -0.5% in 2009) due to two factors: (1) rapid price inflation in construction in 2008; and (2) a pullback in new home construction, which will have its major impact in 2009.

The constant dollar increase will begin to grow again in 2010 (+1.8%) and then gather even more speed in 2011 (+5.7%). The prime driver at that time will be the engineering construction category. Besides fossil-fuel energy projects, which will proceed at a good pace throughout the forecast period, a new era of electric power projects (both alternative and traditional) is about to get underway and this will contribute to gathering investment momentum as the next decade arrives.

Non-residential building construction is relatively strong at present, due to good levels of office-based employment and healthy retail spending. But the cycle is turning as a result of the slowdown both in Canada and south of the border. Anticipated lower tax revenues are affecting some government institutional spending plans. Industrial investment is strong at present in resource areas (i.e., due to high world commodity prices), but manufacturing has been playing it safe while adjustments are made to factor in the higher-valued Canadian dollar.

Cost Index Assumptions for Deflating Current Dollars
CanaData's cost index assumptions for residential construction are: +5.0% in 2008 (versus 2007); +3.5% in 2009; +3.2% in 2010; and +3.5% in 2011. For non-residential building and civil/heavy engineering construction, the price deflators are: +6.5% in 2008; +5.0% in 2009; +3.8% in 2010; and +4.0% in 2011.