End of Government Stimulus Won’t Derail Non-Residential Construction Recovery

OTTAWA - March 15, 2011 — Increased spending on commercial and industrial space this year will help non-residential construction revenues return nearly to pre-recession levels, according to The Conference Board of Canada’s Winter 2011 forecast for the industry.
Spending on institutional construction will decline by almost six per cent this year. However, investment in commercial and industrial space is growing more quickly than expected. U.S. retailers’ increasing interest in Canada is filling up retail space and boosting construction intentions. In addition, spending on industrial space has been surprisingly strong considering that the manufacturing recovery remains weak.
In line with increased construction activity, industry costs are also rising. Wage growth in the industry is accelerating and prices for building materials, especially products that use oil as inputs, are on the rise. Costs will increase by 2.4 per cent this year and are expected to grow by an average of 5.6 per cent annually over the next four years.
Industry revenues will reach $49.5 billion this year and expected to surpass their pre-recession peak of $50.4 billion in 2012. Pre-tax profits will also begin to improve starting this year, rising from $922 million in 2010 to $1.3 billion in 2011. However, costs and competitive pressures are expected to keep industry profits below pre-recession levels. www.conferenceboard.ca.