Canadian Construction Growth Continues - Business Outlook 2008
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SECTION: Business Outlook 2008

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Canadian Construction Growth Continues

By Pierre Bernard

Article Date: 01-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

AED regional directors report on the outlook in their areas for 2008.

Pierre Bernard, AED Vice President Canada, R.P.M. Tech, Inc, Laval, Quebec

The construction industry in Canada continues to boom, especially in the western provinces of British Columbia and Alberta.

Building: According to Statistics Canada (the national statistical agency) September 2007 marked the fifth consecutive month that the total value of building permits in Canada exceeded $6 billion - historically high levels.

Residential: The single-unit residential market has flattened somewhat, but at near-historic highs. Canada's mortgage and taxation environment differs from that in the U.S., so the subprime mortgage problem has not affected the Canadian market to any significant degree. Multi-unit residential building continues to grow, especially in the major urban centers.

Nonresidential: Driven largely by industrial/commercial/institutional investment in Central Canada and Alberta, nonresidential building construction registered a fourth year of growth in 2007. Investment reached $10.4 billion in the third quarter, up 4.9 percent from the second quarter.

Heavy construction: Heavy construction projects in the energy, mining and infrastructure sector will drive growth across the country into the next decade. According to the Canadian Construction Association, aggregated provincial highway capital budgets have increased by more than 26 percent over 2006-07 provincial highway budgets.Regionally, the status is as follows:

Atlantic: Canada's Atlantic provinces are seeing heavy investment in energy and mining projects. A coming mega-project is the Hebron-Ben Nevis offshore development. Interest is growing in an "Atlantic Gateway," connecting European and Middle Eastern shipping routes with the North American heartland in a series of port, rail, road, and terminal upgrades.

Central Canada: In Ontario and Quebec, recent infrastructure collapses have drawn attention to the condition of roads and bridges. In both provinces, aging infrastructure is getting increased attention from the provincial governments.

Prairies: Saskatchewan and Manitoba's construction economies are growing through investment in energy, mining and infrastructure.

Western Canada: Alberta's economy is powered by the oil sector. At present, a tremendous amount of work is underway on the Oil Sands. As well, infrastructure to support the growing population is driving construction.

British Columbia: Building and infrastructure improvements related to the 2010 Olympic and Paralympic Winter Games in Vancouver have generated a lot of construction business. As well, the steady growth of the lower mainland area has seen much new construction of all kinds.

B.C. and Alberta together are involved in the construction of the Asia Pacific Gateway and Corridor - a network of ports, terminals, highways and railway lines that will carry import/export business to and from the Pacific economies through ports in B.C. The federal government recently added $409 million to the $591 million previously budgeted to support this initiative.

National: The current, Conservative government is addressing infrastructure spending on many fronts. The last federal budget included $2 billion per year from the Gas Tax Fund, a Building Canada Fund with $8.8 billion to be spent over seven years, a fund for gateways and border crossings with $2.1 billion in funding over seven years, as well as a new public-private partnerships fund.

Canada has always been the U.S.'s top export customer for construction equipment, accounting for roughly a third of total U.S. exports. Exports in the first half of 2007 were estimated at $2,684,200,000 by the Association of Equipment Manufacturers.

In a survey of Canada's largest construction contractors conducted by On-Site magazine, average growth of 14.4 per cent was predicted for 2008.


Risks for Canada

Concerns include labor shortages, which have delayed building and driven up costs on many projects, and growing costs for materials and equipment. Another potential risk is a softening in the Canadian economy resulting from a decline in U.S. consumer confidence. With the current economy oriented more toward commodities and global markets, though, this would have less impact than it would have had in the past.

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Article Categories:  Business Outlooks  »  Economic Outlooks