DCN ARCHIVES

Live blog archive from the CanaData Construction Industry Forecasts Conference | Sept. 24, 2009

4:45 p.m. That will do it. Thanks for joining us today from the CanaData conference - an action-packed day of insights and analysis from some of the best economic minds around.

4:36 p.m. Non-residential construction has split into two clear divides, Carrick says: 1) privately-funded work, "which has almost completely dried up;" and 2) publicly-funded projects, "which is where the strength lies due to stimulus money."

4:22 p.m. Carrick notes that oil production facilities that were being postponed, delayed and cancelled a year ago are now being reconsidered. Construction costs have come down and the world price of oil has recovered from a low of $35 U.S. per barrel to its present level of around $70. Plus: Chinese investment money is now flowing into Alberta’s oil sands.

4:12 p.m. Re: Pace of public sector work coming on stream: 45 of the 50 largest projects to start in Canada since April have been either institutional or engineering, says Carrick. Major projects have been educational facilities in institutional and bridge, road and water treatment plants in the civil field.

4:01 p.m. Industrial construction is being impacted by poor profit levels, tighter credit and a rising Canadian dollar, Carrick says. "But the real story lies in capacity utilization rates. Only three sub-sectors out of 20-plus are operating above 80% of capacity and they are in areas of necessity such as electric power generation and food production."

3:50 p.m. Carrick says there've been three key dates for Canada in the past year: 1) July 2008: The peak for commodity prices; 2) September 2008: The stock market collapse -- the recession begins for Canada; up until then it hadn't hit us yet; 3) February 2009: Trough for many commodity and stock market prices -- since then we've been on a gradual upswing.

3:46 p.m. Alex Carrick, Reed Construction Data's chief economist, is on stage now, wrapping up the conference with a discussion of construction forecasts.

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3:23 p.m. Time for a final coffee break and then it's into the home stretch, with a presentation from Reed Construction Data chief economist Alex Carrick - an overview of construction forecasts.

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3:20 p.m."We remain concerned there is still not a proper infrastructure funding mechanism for municipalities," Ferreira says. "We think it's time to have a national dialogue on this issue -- we have to find a better way to fund infrastructure because the current way isn't working."

3:18 p.m. Ferreira says stimulus will contribute to an upward trend for construction industry -- some of it will be seen this year, the bulk of it next year.

3:16 p.m. Construction industry reached employment peak in October 2008 -- 1.26 million jobs. Since then it's dropped off; there have been about 116,000 net jobs lost across the country. Hopefully it hit bottom in July, Ferreira says.

3:09 p.m. Federal government says that approximately $15 billion will be spent this year alone on infrastructure - "That's a lot of money to dump on the economy all at once," Ferreira says. "This will probably be one of the busiest seasons on record."

3:06 p.m. Federal government has been criticized for speed of stimulus rollout in its Economic Action Plan -- "When people say money isn't flowing, they don't understand nature of the program," Ferreira says. It's the municipal or provincial responsibility to get these projects out the door. The federal government will pay its share of the bills after the project has been started.

2:59 p.m. Harper government's infrastructure spending program, the Building Canada Plan -- $33 billion over seven years -- is the most significant in years, Ferreira says. But most spending was delayed because of the time it took to sign framework agreements.

2:50 p.m. "What we've seen is shrinking capital plans -- less money going into infrastructure maintenance and repair," Ferreira says. The avg. age of most core public infrastructure -- water, roads, sewers and bridges -- has reached 50% of its "useful service life."

2:48 p.m. Currently 28% of Canada's public infrastructure is more than 80 years old. 59% of our infrastructure was built before the moon landing in 1969 -- "That's cause for concern," Ferreira says.

2:46 p.m. Canada ranks high in the World Economic Forum's infrastructure index - ahead of the U.S., Ferreira says.

2:40 p.m. Now we'll be hearing from Bill Ferreira, director of government relations and public affairs with the Canadian Construction Association. He'll be talking about the status of government infrastructure spending.

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2:36 p.m. CREA projects $54.6 billion will be spent on renovations in 2010; $54.4 billion in 2011.

2:33 p.m. Renovation spending intentions: CMHC survey shows there'll be more renos in Canadian cities but less money will be spent on them. Most people will spend what they had planned, given the recessionary conditions. "They'll pull their horns in," Klump says.

2:30 p.m. Renovation spending spinoff: BC tops the bunch - an average of $17,800 in transactions, followed by Ontario and the Prairies, CREA says.

2:25 p.m. "The much ballyhooed need to draw down inventories needs to be taken in context -- it's as bad as it's going to be," Klump says.

2:21 p.m. "Starts appear have bottomed out and are starting to creep back up," Klump says. No one expects to hit 175,000 anytime soon, though, he adds.

2:16 p.m. It's been a "dramatic rebound" in resale housing -- "no other economic indicator in Canada has had this kind of rebound," says Klump. "But nobody expects that rebound to continue."

2:14 p.m. And we're back. Gregory Klump has taken the stage for his presentation. "What happens in 2011 - nobody knows," he says. "There's some speculation the rebound we're in will be a 'dead-cat bounce.'"

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1:53 p.m. We're having a quick break, then right back at it, with a presentation from Gregory Klump, chief economist with the Canadian Real Estate Association, on housing starts in Canada and the outlook for residential renovation spending.

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1:40 p.m. Schizas asks: How did the auto industry become the sacred workers while the construction industry get all but ignored in the recession discussion?

1:38 p.m. We've been through tougher times than this, Schizas says. And "we're 33 million people living on the resources of a continent -- we're very well positioned... if we can't make it work, who can?"

1:35 p.m. Schizas says a strong Canadian dollar is good and helps boost Canadian productivity. He notes that most construction equipment used by domestic firms is bought outside of the country.

1:31 p.m. "Americans live in a domain Canadians aren't familiar with," Schizas says. "We're more conservative because we're taxed so heavily." We don't have that much disposable income "in our jeans."

1:28 p.m. The economic crisis is a "chance to learn a lasting lesson," Nazareth adds. "If it was heeded, it would give you a much more sustainable economy for next 10, 20 years."

1:21 p.m. "My concern is that deficit spending is going to leave us in a difficult position in the years ahead," says Nazareth, who worries protracted stimulus spending could lead to inflation.

1:18 p.m. "If we can leverage and motivate the spending into the infrastructure sector, it boosts productivity," Schizas says. "We have neglected infrastructure (in Canada) - I'd like to see a recommitment."

1:15 p.m. "I'm worried about what happens over the next few years -- we have a global expansion based on spending," Nazareth says. There is a lot of fear that if the stimulus money is taken out too soon, we could have another leg of the downturn, she says.

1:10 p.m. Nazareth thinks the media might also be to blame. The crisis wasn't covered well enough, it wasn't explained well enough, she says. "I don't think the seriousness of the situation was understood."

1:07 p.m. Schizas doesn't agree. He says there was "massive mortgage fraud" in the U.S. "When you're sitting down and originating a mortgage and you don't have the credit quality to work it through, you're creating a fraud... you've got to start with the company, not the individual." The audience applauds this last line.

1:04 p.m. Nazareth is offering some of her thoughts on who's to blame for the economic meltdown. "I don't blame the lenders... nor politicans and executives -- I think the consumers themselves have to take some blame," she says. "If you take on something, it's your fault."

1:01 p.m. Dessert is being served, and talk radio business analyst Lou Schizas and BNN economist Linda Nazareth (who are married, BTW) are up on stage delivering their remarks.

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12:01 p.m. We're breaking for lunch. Back at 12:45 p.m. for a keynote speech from Linda Nazareth and Lou Schizas: 'Markets, meltdowns, media and more.'

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11:54 a.m. Decline in US dollar is a major factor lifting commodity prices -- investors then shift into commodities as a hedge. Loonie and Aussie dollar are becoming stronger as a result, Mohr says.

11:50 a.m. Mohr expects a pick up in U.S. steel prices. Gold prices have moved above the US$1,000 mark, she notes.

11:46 a.m. Canadians should ask: Should we rely on exporting crude oil from the Alberta oil sands solely to the U.S. or diversify to China and other parts of Asia? Mohr: "My answer is definitely yes."

11:42 a.m. Mohr says she's surprised the media is not paying attention to the increase in U.S. petroleum consumption - up 4.3% year over year as of Sept. 09

11:39 a.m. Mohr says U.S. building material prices are expected to rally in early 2010. Crude oil will approach $90 mark (currently it's around $71.51 US$/bbl); natural gas will hit $5.25 US$/mmbtu; copper $2.90 US$/lb.

11:36 a.m. Global credit conditions have improved "markedly" since last fall's banking crisis, Mohr says.

11:34 a.m. In the past six months, there has been renewed interest by investment and hedge funds in commodities as an asset class, says Mohr. This has given the Dow Jones Industrial Average a boost.

11:28 a.m. After recessionary conditions in 09, there'll be "quite a turnaround in the global economy next year," Mohr says. She expects 3.5% growth worldwide growth in 2010, led by China (9.3%) and to a lesser extent India (6.5%). Canada will be around 2.8%.

11:22 a.m. Patricia Mohr, V-P of economics with Scotiabank, has begun her presentation on world commodities.

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11:11 a.m. Methods of renewable energy generation, solar panels in particular, are "slowly blurring the distinction between customers and utilities," Koroluk says.

11:07 a.m. Building Information Modeling (BIM) has caught on slowly because "it's not simple and it's not cheap," Koroluk says. Companies are also reluctant to adopt BIM because they have large data inventory derived from their old 2D system. They feel BIM would mean abandoning that data.

10:58 a.m. Net-zero homes, which generate as much power as they use, might be the next big trend in Canadian housing, says Koroluk.

10:49 a.m.: We have labels telling us what's in the food we eat, why not have something similar for green buildings? asks Koroluk.

10:45 a.m. Construction industry is changing -- better equipment, designs, materials, software -- and all this is driven by energy, Koroluk says.

10:41 a.m. Korky Koroluk is speaking now. His presentation is entitled: 'Riding the waves of change.'

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10:20 a.m. There's now going to be a brief break, allowing folks to power up on coffee and snacks and prepare for the next two presentations: Daily Commercial News contributing editor Korky Koroluk and Patricia Mohr, V-P of economics with Scotiabank.

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10:10 a.m. A conference attendee asked about LEED: "Have you seen clients asking for these buildings?" Morse says yes, "but not many people are prepared to pay a premium for it."

10:06 a.m. Overall Canadian office markets performing "better than expected," given the worldwide situation, Morse says. Avg vacancy rate is 6.1% -- demand remains weak in most markets. But panic and fear is over.

10:01 a.m. Calgary office market a "ticking time bomb," says Morse. 6.5 millon sq. ft. of office space under construction with few tenants - "(Developers) are holding their breath."

9:55 a.m. Restoration or revitalization projects - a lot of growth in that sector still to come, Morse says, as landlords are forced to compete with new generation of buildings.

9:50 a.m. "We are in no way shape or form looking at an oversupply problem (in GTA) - it's a temporary bulge you have to go through," Morse says.

9:45 a.m. Greater Toronto Area office market is declining, Morse says. It will bottom out in 2011, he predicts, with recovery beginning in 2012. Space will get tight by 2014.

9:41 a.m. At the moment there is a "disconnect between landlords' expectations and tenants' expectations - one of the reasons it's difficult to get deals done," Morse says.

9:35 a.m. Paul Morse, senior V-P, GM and national practice director with Cushman & Wakefield LePage, has begun his presentation on vacancy rates and commercial construction markets.

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9:25 a.m. As economy recovers, skilled labour shortages will be an issue, says Jestin. Also, environmental challenges loom on the horizon - this is where big bucks are going; where the innovation will be focused.

9:19 a.m. Spending has weakened in all regions of Canada, Jestin says, Alberta and B.C. especially. But he's feeling positive about B.C.'s prospects going forward.

9:14 a.m. Jestin says the commodity rebound will help the loonie to "take flight." But the U.S. dollar remains on "shaky ground" - mainly owing to the drop in oil prices. "Parity is on the horizon," he says.

9:10 a.m. Less monetary stimulus ahead, Jestin says. This will contribute to a slowdown in the second half of next year.

9:03 a.m. U.S. market will be in a more balanced situation in 2011-2012. The freefall in U.S. housing and autos is over, Jestin says. But U.S. private and public financial strains remain intense.

8:59 a.m. Emerging market demand will boost commodity prices, Jestin says, which will revive Canadian export earnings. Oil, natural gas and copper will be among the most profitable.

8:55 a.m. Jestin says the things triggering turnaround in Canada, U.S. and the world include: 1) Inventory adjustment (the auto sector, for example); 2) Shovel-ready projects - money allocated earlier this year begins to make its impact. "Growth is not going to disappear," Jestin says. "We believe we will be going into a slower growth world" where 2 to 2.5% is the norm versus 3 to 3.5% as was the case earlier in the decade.

8:51 a.m.: Warren Jestin, Scotiabank's senior vice-president and chief economist, has begun his presentation, entitled: 'As the world turns.'

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8:45 a.m. John Richardson, RCD Canada's director of Western sales, has just introduced the audience to DOTS - Data on the Spot - remote devices that will allow for live polling of conference attendees. The crowd is currently doing some test questions to see if the system is working. It appears to be.

8:38 a.m. RCD Canada V-P and GM Mark Casaletto is delivering opening remarks. He notes that last year at this time the markets were in the midst of a downward spiral.

8:34 a.m. Welcome everyone. Looks like things are about to get started here at the CanaData Construction Industry Forecasts Conference at the Liberty Grand in Toronto. After opening remarks, Warren Jestin, Scotiabank's senior vice-president and chief economist, will discuss the economic outlooks for Canada, the U.S. and the world.