Construction market overview
Construction activity continues to soften
After two consecutive quarters of retrenchment, construction Gross Value Added (GVA) stabilized in Q3 2023, remaining unchanged on the quarter. Activity levels, however, continue to be strained on a quarter on year perspective, with growth dropping by 0.6 percent for the third quarter in a row.
Residential activity surprised on the upside, growing by 3.7 on the quarter, yet momentum is impaired by high interest rates and continued cost of living constraints. One quarterly increase in the last 18 months is unlikely to see the sector shift from its downward trend despite a growing population and housing shortages.
However, new measures outlined in the 2023 Fall Economic Statement and Canada’s Housing Action Plan should help support the sector to grow in the future. More federal land for redevelopment, Goods and Service tax exemptions for new purpose-built rental housing and additional funding for the Apartment Construction Loan Program could kick-start demand.
Source: Statistics Canada
Civil engineering and other construction activities continues to provide a bright spot for construction activity across Canada, growing by 8.9 percent on the year in Q3 2023. Although, the latest quarterly reading fell for the first time in three years. Nevertheless, sustained investment in road, rail and other infrastructure initiatives should see the sector support wider industry growth and buoy broader economic performance overall.
As with the wider economy, leading indicators within construction tend to be muted at both a national and provincial level.
Figure 5:
Ranked time series of investment in construction, by geography, over the last 10 years - Total; current value
Canada
Ontario
Quebec
British Columbia
Alberta
Manitoba
Nova Scotia
Saskatchewan
New Brunswick
Newfoundland and Labrador
Prince Edward Island
Yukon
Northwest Territories
Source: Statistics Canada
Nunavut
In 10 of the 14 provinces across Canada, investment in construction fell on the quarter in Q3 2023. Investment levels have steadily eased off in many mature markets, although Alberta, Saskatchewan and New Brunswick appear to be continuing an upwards trend.
Monthly data is more supportive of wider growth and conveys more optimism for the industry, yet it is quite volatile and prone to revision. Nonetheless, as a good indicator of future activity, investment in construction and building permit data suggests that sector progress may be subdued. GVA, as a result, could struggle to pick up pace in the immediate term.
However, as demand settles, input costs within construction appear to be abating. If this helps ease construction escalation, make projects more affordable and easier to deliver, construction workloads could improve and see developments that were previously unviable come back on-line.
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