Canadian construction industry growth holding pace with inflation: FMI

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Ontario Construction Report staff writer

Raleigh, NC-based FMI says Canadian construction industry’s growth is keeping pace with inflation, with a three per cent increase projected for 2019.

This growth is “slightly less than what we saw in 2018, which grew by four per cent, compared to (20)17,” the consulting and investment banking organization’s managing director Jay Bowman says in a video posted on its website.

“But the reason why we’re not seeing a more negative downturn, is really the juxtaposition if you will of different economic influences on the national economy,” Bowman said.

“On the positive side we continue to see household spending at high levels (as) job growth continues. There’s more investment from a business perspective (with) equipment and machinery, and the US has removed the tariffs on aluminum and steel.”

However, Bowman said some factors are limiting growth. “Most of those revolve around exports decreasing, the lower price of oil and continued uncertainty around trade,” he said.

Overall, he said FMI sees growth continuing at roughly 2 to 2.5 per cent over the next five years. “There are some questions around the residential side” in the near term with a decline in starts expected over the next 12 months, he said.

“Similarly, on the commercial side and in non-residential building construction, we’ve seen some of the major projects come to an end. But on the non-building side, (growth) this year should actually be fairly large because of the number of mega projects that are being brought to the market in both the power and water and wastewater markets.”

Bowman noted that contractors and owners should baying attention to the change in spending composition.

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“I typically look at that in (in terms of) replacement and displacement,” he said. “You can think of replacement as the change in construction. For example, take data centres. What we’re seeing in the replacement change is that there’s more of the hyper-scale, the million square foot-plus data centres compared to the co-location or smaller enterprises.”

“From the displacement perspective, we see this primarily in the retail sector where the rise of e-commerce has led to more investment in distribution centres and less in the traditional brick and mortar retail,” he said.

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