August 11, 2008

Economic activity in Canada’s construction sector continues to shrink

RICHARD GILBERT

staff writer

Economic activity in Canada continued to fluctuate between monthly periods of moderate economic growth and decline in May, while the construction sector shrunk for the third consecutive month.

Statistics Canada released a report on Real Gross Domestic Product (GDP) by Industry on July 31, which stated that real GDP in Canada declined slightly in May.

The decline is seen as part of a period of irregular cyclical fluctuations in Canada.

“Economic activity continued its seesaw pattern of recent months, as real gross domestic product edged down 0.1 per cent in May after rising 0.4 per cent in April,” said the report.

A significant decline in mining and oil and gas extraction (1.2 per cent) played a role in this weak result.

However, the weakness was not entirely concentrated in that sector.

Declines were also recorded in finance, forestry, construction and wholesale trade.

“Overall, the Canadian economy is slowing and loosing momentum as we move into 2008,” said Jock Finlayson, executive vice president of the Business Council of B.C. “We had a decline of 0.3 per cent in the first quarter of 2008. The preliminary data we’ve seen since the first quarter says growth could fall on either side of zero in the second quarter.”

The construction sector contracted again, down 0.4 per cent in May.

All components of the construction sector declined, including residential buildings, non-residential buildings and engineering and repair work.

The construction sector experienced a decline of 0.5 per cent in March and April.

“The increases in apartment and row-house construction were not enough to offset the declines in single-family and semi-detached homes construction and in alterations and improvements work,” said the report.

“In the non-residential sector, the drop in industrial building construction was only partially offset by the increases in commercial and public buildings.”

According to Finlayson, the data currently available for B.C. is partial and not as complete as that at the national level.

Despite this, he said he believes a slowdown is being experienced in Western Canada. However, it is not as drastic as the slowdown in the rest of Canada.

“We have been operating at a high level of activity on the construction side, so even a slight pull back means there won’t be growth,” explained Finlayson.

“The sector has been slowing modestly from a superheated level. I don’t see a big drop off or a sudden collapse of spending, but I do see a cooling off and expect to see this continue over the balance of the year. Construction firms will still be busy.”

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