According to Statistics Canada, investment in non-residential building construction increased by 1.7% quarter over quarter in current dollars in the final quarter of 2008. This rise follows a 1.5% quarter-over-quarter increase in the third quarter.

In year-over-year terms, the increase in investment was 8.0% in the fourth quarter and 7.1% in the third quarter of 2008.

Two of the three components of non-residential building contributed to the fourth-quarter increase. Institutional construction was up by 3.7%, followed by commercial, up 1.5%. Investment in industrial projects, however, declined by 1%.

In real inflation-adjusted terms, investment in non-residential building construction fell 1.2% quarter over quarter in the fourth quarter, as a result of a decline in the volume of industrial (-4.0%) and commercial (-1.5%) construction.

In the quarter, institutional construction was up by 1.4%.

In Alberta, the total volume of non-residential building fell by 3.0%. This decrease can be attributed to a sharp 8.5% quarter to quarter drop in industrial building and a 3.2% decline in commercial construction.

In Ontario, non-residential building slipped by 1.8%, due to a 6.9% reduction in the volume of industrial construction, together with a 3.2% fall in institutional construction and a modest 0.9% retreat in commercial work.

In Newfoundland and Labrador, a 50% quarter- over-quarter increase in commercial building was the major driver behind the 26% rise in total non-residential building.

In Prince Edward Island, an 85% jump in institutional building, the result of a major expansion of the Queen Elizabeth Hospital in Charlottetown, largely offset an almost 30% drop in industrial construction investment.

The volume of investment in non-residential building was also higher in New Brunswick (+5.9%), Manitoba (+3.9%), Nova Scotia (+3.7%) and Saskatchewan (+1.7%).

Looking forward, the large volume of major projects currently underway, combined with the effect of stronger profit growth mid way through 2008, should support non-residential building construction in the first half of the year.

However, this support is likely to dissipate by mid 2009, due to the effects of declining industrial capacity utilization, retreating corporate profits, slowing growth of office-based employment, tightening lending conditions and a breathtaking drop in investor confidence.