June 10, 2009
Economy at a Glance — June 11, 2009
Latest construction data shows signs of struggle south and north of the border
Prepared by Alex Carrick, Chief Economist, CanaData
The April 2009 housing starts number for the United States was a continuation of the bad news in the residential sector that extends back several years. Singles (+2.8%) increased month to month, but multiples plummeted by almost 50%. Multiple-unit starts are a more volatile series. Multi-unit starts in April of this year were -72% versus April of last year. The net effect yielded total unit starts of only 458,000 in the latest month (SAAR), the lowest point so far and -80% versus the January 2006 peak of 2.273 million.
Part of the problem in the multiples market is lining up credit for the retail and office space that often accompanies new apartment and condominium developments. Tighter credit remains a problem for both prospective homeowners and new condo developers. It also has to be remembered that the ongoing troubles in labour markets are going to have a spillover effect in the housing sector. The month-to-month employment decline in the U.S. in April (-539,000 jobs) was less than in March (-700,000), but it was still a sobering and somber performance.
In Canada, housing Statcan’s cost index is based on five building models in the three major type-of-structure categories, commercial, industrial and institutional. General and specialty trade contractors are surveyed. The biggest moderations came as a result of material cost declines in general and weaker market conditions, particularly in western Canada.
The overall Canada index figure was -4.2% on a quarter-to-quarter basis. Vancouver (-10.7%) led the declines, while Montréal had the only increase among seven major cities. On a year-over-year basis, the Canada-wide change was +1.0%. Again, cities in the West led the declines, with Vancouver (-9.1%) and Edmonton (-4.7%) as the frontrunners.
Everyone wants to see an improvement in the numbers. But the turnaround will come in incremental stages, with a step or two forward matched by a step or two backwards for several more months. What is the conclusion to be reached from all of this? Government infrastructure spending support in both the U.S. and Canada cannot come fast enough.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his
blog and Market Insights.
U.S. Monthly Housing Starts Data source: U.S. Census Bureau (Department of Commerce)/Chart: Reed Construction Data – CanaData.
(seasonally adjusted at annual rates)
