Construction intentions in Canada cooled for a fourth consecutive month

Construction intentions in Canada cooled for a fourth consecutive month in February, on the heels of a sharp decline in the value of building permits for non-residential construction in Ontario.

Municipalities issued $5.8 billion worth of building permits, down 1.0% from January. Intentions peaked in May and June 2007 at $7.0 billion.

February's decline resulted from much lower non-residential construction intentions in Ontario. If the province were excluded, the total value of building permits nationally would have increased 9.8%, instead of declining 1.0%.

Nationally, a marked increase in residential intentions was not enough to offset a decline in intentions in the non-residential sector.

In the residential sector, the value of building permits increased 18.2% to $3.9 billion. This was fuelled by jumps in values of both multi- and single-family permits.

The value of non-residential permits fell 25.6% to $1.9 billion, the lowest level over the last 12 months. February's loss was due to double-digit decreases in permits for all three components: institutional, commercial and industrial.

These results could have an impact on building sites later in 2008, as building permits are a leading indicator for construction activity.

Substantial decline in Ontario

Gains in the total value of building permits in seven provinces and in all three territories were totally offset by a substantial decline in Ontario.

Overall construction intentions dropped 16.0% to $2.0 billion in Ontario, the lowest value since April 2007. Falls in all three non-residential components in Ontario led the non-residential sector to a 44.9% decrease in February. However, this decline was partly offset by a strong rebound in the province's residential sector (+21.3%).

New Brunswick and Saskatchewan were the others provinces showing retreats, also the result of lower non-residential construction intentions.

The largest gains in dollar terms occurred in Alberta (+11.8% to $1.3 billion) and British Columbia (+16.1% to $945 million). In both, the demand for new dwellings largely drove the gain. Several large projects for multi-family dwellings were approved in Alberta, sending the value of multi-family permits to its second highest level on record.

All provinces and territories posted gains in the residential sector.

Non-residential: Significant decline in every component

The value of building permits declined substantially in all three non-residential components in February.

Following a 27.0% gain in January, the institutional component plunged 35.7% to $452 million, the lowest level since April 2007.

The decline was spread across various types of buildings (schools, medical buildings, administrative buildings, nursing homes). Overall, seven provinces posted declines, with the largest in Ontario, Alberta and Quebec.

In the commercial component, the value of permits fell 16.2% to $1.2 billion, largely the result of a significant decline in projects for office buildings and hotels. It was the second lowest level over the last 12 months. Again, Ontario recorded by far the largest share of this decrease, while intentions for retail space surged in Alberta.

On the industrial side, the value of permits plunged 39.4% to $265 million, the lowest level since March 2006. This followed a 32.2% gain in January. Significant declines in projects for manufacturing buildings in Ontario and utility buildings in Alberta were behind these results. In Ontario, the value of industrial permits hit its lowest level since April 2005.

Overall, the value of non-residential permits has been on a downward trend since last July. Intentions peaked for this component in May and June last year.

Uncertainty related to the impact of a weakening US economy and the high dollar could have a negative impact on non-residential construction intentions. However, vigorous retail sales, low office vacancy rates, strong demand for health care facilities and large corporate profits are favourable factors for non-residential intentions.

Housing sector: Surge in demand for multi-family units

The value of permits for multi-family dwellings surged 31.0% in February to $1.5 billion. This level was nearly 5.0% above the average monthly results in 2007.

Municipalities approved 9,767 multi-family units in February, up 20.9% from January.

The value of single-family permits rose 11.6% to $2.4 billion, and municipalities approved 9,714 units, up 11.6%.

Despite the positive results in February, the number of residential units approved has been on a downward trend since the end of the summer 2007.

Price increases in the housing sector and signs of a weakening US economy may have contributed to a softening of demand. However, several factors could have a positive impact on the demand for housing, including steadiness in employment, growth in disposable income, strong immigration as well as low interest rates.

Metropolitan areas: Non-residential permits fell across Ontario

The total value of permits declined in 18 out of the 34 census metropolitan areas in February. The largest declines (in dollars) occurred in Toronto, Ottawa and London, as non-residential construction intentions fell in these three areas.

Among the 15 metropolitan areas in Ontario, only Hamilton and Barrie posted gains in the non-residential sector in February.

In contrast, the largest gain (in dollars) among metropolitan areas occurred in Calgary, the result of strong demand for new multi-family dwellings. Hamilton and Quebec followed, thanks to rises in both residential and non-residential sectors.

Available on CANSIM: tables 026-0001 to 026-0008 and 026-0010.

Definitions, data sources and methods: survey number 2802.

The February 2008 issue of Building Permits (64-001-XWE, free) will be available soon.

The March building permit estimate will be released on May 6.

To order data, contact Jasmine Gaudreault (              613-951-6321       ; toll-free               1-800-579-8533       ; bdp_information@statcan.ca). For more information, or to enquire about the concepts, methods or data quality of this release, contact Étienne Saint-Pierre (              613-951-2025       ), Investment and Capital Stock Division.