Canadian home building is near record activity, but it appears it’s hard to keep finding new money. Statistics Canada (Stat Can) data shows investment in building construction fell in August. The decline marked the fourth consecutive month, and it was due entirely to housing. Residential building construction investment dropped so fast, it’s now technically a correction.
Canadian Building Construction Fell For The Fourth Month In A Row
Canadian building construction edged lower once again. Seasonally adjusted building construction investment fell to $17.7 billion in August. This is down 2.0% compared to a month before, a substantial single-month drop. Stat Can estimates this is $12.7 billion when adjusted for inflation, with a 2.6% decline over the same period. A lot in that paragraph, but it’s hard not to focus on how large the inflation adjustment was. It trimmed nearly a third.
Building construction has been following this trend since peaking in April. August marked the fourth consecutive month to see seasonally adjusted volumes fall. From the peak in April to the number reported in August, monthly dollar volumes are 10.5% lower. That technically makes this a correction, driven entirely by a slowdown in housing.
Falling Home Building Investment Is Responsible For The Drop
Residential building construction, aka housing construction, was overrepresented in the cooldown. Actually, it was the whole cooldown. Seasonally adjusted residential building construction fell to $13.0 billion in August. This is 2.9% lower than the month before, with declines in every province but Nova Scotia. In case you missed it, that’s where everyone fleeing Ontario is heading these days.
Canadian Residential Building Construction Investment
The monthly dollar value of residential building construction in Canada.
Source: Stat Can; Better Dwelling.
Representing the lion’s share of total building construction, it also peaked in April. As one would expect, this segment reported four consecutive declines as well. The latest numbers are down 14.2% from the peak in April to the current trough in August. That also puts it in “correction” territory. There’s probably still no need to worry about supply yet. The trend is still significantly elevated above pre-pandemic levels.
Non-Residential Building Construction Is Softening The Impact
Not all of the data in the latest release was bad news. Non-residential building construction pushed higher. The segment reached $4.7 billion in August, up 0.6% from the previous month. This segment includes commercial, industrial, and institutional buildings. These are places that facilitate commerce, and productivity. More bluntly put, this is where work happens and it’s good news to see investment sink into this area.
Canadian building construction slipped lower, but it’s still high compared to pre-pandemic data. As mentioned over the past few months, this is more of a concern for the economy than supply. It’s still at dollar volumes much higher than we’ve seen in the past decade, so supply is coming. Since the economy is so dependent on real estate though, the drop can prove to be a drag on the recovery.
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