The continuing flow of people to, and investment in Canada will help keep workloads stable in 2015. Investment to the energy sector in particular – hydro, oil and gas, and renewables – will combine with a steady stream of immigrants that helps to sustain residential demand to power steady growth in the construction industry.
An estimated $675 billion worth of projects – 75% of them in the energy sector – are underway or planned over the next decade. Uncertainty caused by current price swings and legal and environmental challenges may cause delays, but the long-term tide is rising for oil and gas, liquid natural gas, and hydroelectric as well as renewable energy projects. About half of the foreign direct investment in Canada – an estimated $343 billion in 2013 – went to manufacturing, oil and gas and mining.
Continuing high levels of immigration targeted at 285,000 in 2015 – and a total of more than 2 million since 2006 – are also supporting Canada’s position as a construction powerhouse. These newcomers drive our 1.2% annual population growth, almost double that of the U.S., and support robust residential construction, especially in the core of large urban centres as more and more people move downtown. The projections for stable housing starts reflect the steady influx: 189,000 units in 2014 and 189,500 in 2015.
Even with the oil price drop, construction will remain strong in the west.
Bolstered by a slow but steady U.S. recovery, a lower loonie that favours manufacturing exports, continued infrastructure and other non-residential spending, and resilient residential sectors in their big cities, Ontario and Quebec are in the middle of the pack. Atlantic Canada is again seeing record investment in major projects, but population losses sap the vitality of overall construction activity.
The consensus view among major banks is that Canada’s GDP growth will be close to 2.3% in 2014 and 2.5% in 2015. The Bank of Canada is expected to continue to keep interest rates at or near the historic lows of the past half-decade, at least until the second half of 2015. The lower rate serves to dampen inflation, which should also help to keep overall construction escalation low in 2015.