Building boom likely to continue

Monday, February 27th, 2006

Statistics Canada predicts a fourth straight year of significant increases

Derrick Penner

British Columbians will spend $34 billion on new buildings, businesses and public works in 2006, according to Statistics Canada, which will make this year the fourth straight year of significant increases in investment in the economy.

The forecast is in Statistics Canada’s latest survey of public and private investment intentions, and represents a 6.5 per cent increase in investment spending from 2005.

Helmut Pastrick, chief economist for Credit Union Central B.C., believes Statistics Canada’s 2006 forecast, which he referred to in Credit Union Central’s latest Weekly Economic Briefing, could even be a bit low.

Statistics Canada forecasts that investment in building new homes will account for $11.2 billion of 2006’s overall investment intentions, an increase of five per cent from 2005.

Capital spending however, which includes non-residential construction and business purchases of machinery and equipment, are forecast to hit $22.5 billion in 2006, a 7.2-per-cent rise.

“One thing I was encouraged by is that the construction industry itself had expected to show a pretty solid gain [amounting to] a 29-per-cent increase over 2005,” Pastrick said.

“That’s the construction industry itself investing so it can increase output.”

Pastrick added that if that comes to pass, overall investment spending for 2006 could surpass the $34 billion figure when Statistics Canada makes its final report in early 2007.

Inflation, however, will factor into the overall investment numbers as labour shortages help push up construction costs. Pastrick noted that construction inflation during 2005 was in the range of six to seven per cent.

However, Keith Sashaw, president of the Vancouver Regional Construction Association, said the rising forecast for investment spending is not just the result of inflation.

“I think the survey would indicate an increasing expectation of more capital projects being undertaken,” he said.

Sashaw noted that the latest edition of the provincial government’s Major Projects Inventory counted some $83 billion in major capital projects being planned between now and about 2011. He added that some $34 billion of those are listed as being currently under construction.

“Certainly [Statistics Canada’s forecast] seems to be consistent with everything we’re hearing,” Sashaw said. “It is a robust time in the economy for B.C.”

In his weekly briefing, Pastrick noted that some of the expectations for rising investment spending are driven by public-sector initiatives, such as the provincial government’s own capital spending plan.

Pastrick added that construction of commercial and industrial buildings is expected to increase, and some of the investment spending will be made to advance “engineering projects,” such as the Canada Line and provincial highways.

However, Pastrick noted that a couple of industries that have been hot lately are expected to see surprising declines.

Statistics Canada projects that B.C.’s hot mining and oil and gas extraction sectors will see a 13 per cent drop in investment spending in 2006, and manufacturing will see a seven per cent decline.

© The Vancouver Sun 2006

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