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INDUSTRY PULSE: Construction business slumps in January

OTTAWA, Ont. --- Construction contracts were a bit harder to find in January, as building intentions cooled down wi...

OTTAWA, Ont. — Construction contracts were a bit harder to find in January, as building intentions cooled down with municipalities issuing $4.5 billion worth of building permits, down 11.0% from December and the lowest monthly level since May 2004, Statistics Canada reported this morning.

The value of building permits increased for only two components multi-family homes and commercial projects.
In total, the value of residential permits fell 6.8% to $3.0 billion in January.

"This was primarily the result of a marked decline in the single-family component in the Toronto metropolitan area, where the value of such permits plunged from a record high in December to nearly a six-year low," Statistics Canada commented in its Daily Bulletin.

The value of non-residential permits amounted to $1.4 billion in January, down 18.8% from December and the second decline in a row. This level, the lowest since March 2004, was due primarily to marked retreats in the industrial and in the institutional components.

Despite January’s overall retreat, however, construction intentions remained high by historical standards. The total value of permits in January was only 3.6% lower than the average monthly level in 2004, which was a record year.
Furthermore, 2005 has started on a faster pace than last year. January’s total value of permits was 8.8% higher than the level recorded in January 2004.

Of the 28 census metropolitan areas, 14 showed a faster start compared with January 2004. Edmonton and Hamilton had the strongest starts. In Edmonton, the strength came from both the residential and non-residential sectors. In Hamilton, the vigorous housing sector played a key role. The low level of construction intentions for single-family dwellings and non-residential buildings gave Toronto the slowest start.

There were steep declines in industrial and institutional permits, however. Builders took out fewer institutional and industrial permits in January, while the value of commercial permits showed a small gain.
Industrial permits fell 51.7% to $155 million, their lowest level since December 1995. This was largely the result of a decline in demand for plants buildings in Ontario.

Industrial permits in Ontario plunged 61.2% to $77 million, the largest drop among the provinces. Except for Saskatchewan, all provinces posted declines.

Permits in the institutional component fell 40.2% to $295 million, the second consecutive monthly decline, after the highest level recorded in November for the year 2004. This was mainly the result of lower demand for permits for educational buildings in Ontario.

Construction intentions in the commercial sector showed continuing strength, increasing 3.8% to $973 million. This was the third highest level since the record set in August 1989. Higher value of building permits for hotels and restaurants in Alberta and strong construction intentions for office buildings and warehouses in Quebec were behind the gain.

"A level of uncertainty exists in economic indicators, mainly with respect to manufacturing and commercial sectors.

According to the latest Business Conditions Survey, manufacturers have begun to retrench following the rapid run-up in the value of the Canadian dollar and substantial increases in the price of crude oil and other raw material inputs in 2004. This has dampened the outlook for the first quarter of 2005," Statistics Canada comments.

Manufacturers are now anticipating lower production and employment levels in the coming months, resulting from dissatisfaction with the current levels of orders and inventories. On the other hand, in 2004, retailers experienced their fifth best annual sales gain of the last 10 years.

Among the provinces, the strongest decline in non-residential permits in January occurred in Ontario where they fell 37.0% to $551 million. It was the province’s lowest monthly value for non-residential intentions since April 2002. All three components recorded strong declines. In contrast, the strongest increase occurred in Quebec, where intentions were up 25.9% to $273 million.

Of the 28 census metropolitan areas, 14 recorded monthly declines in the value of non-residential permits. Toronto experienced the largest monthly decline, the result of a retreat in all three components. Montreal recorded the strongest increase, the result of high construction intentions for office buildings and warehouses.

On a year-over-year basis, non-residential intentions in January were up 14.1% from January last year.

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