Preliminary Investment Trends Report

Transcription

1 Preliminary Investment Trends Report QUEBEC: Construction investment in Quebec picks up over the medium term driven by infrastructure, mining and pipeline projects. Following a decline in, residential construction is expected to rise moderately over the medium term to. INTRODUCTION This report highlights expected investment trends in Quebec from to. It does so with a view to providing initial insights on how new major projects, sustaining capital and ongoing investment trends may guide construction labour markets, serving as a precursor to the more detailed Construction and Maintenance Looking Forward report to be released in early. The information in this investment outlook has been validated through consultations with industry, including owners, contractors and labour groups, and government. Changes in anticipated project schedules, however, can alter these expected trends. BuildForce Canada regularly monitors economic conditions and the scheduling of major construction projects in order to incorporate relevant changes into its forecasting system. ECONOMIC ENVIRONMENT The future economic performance of the provinces is determined by the behaviour of a number of key forces driving the economy. These drivers include the performance of commodity prices and the economies of Canada s major trading partners. While commodity prices remain high in historical terms, many are assumed to weaken in the short term, consistent with the world economy s overall weak recovery. Agricultural prices weakened in, but remain relatively stable in the long term. Prices for metals and minerals were also weaker in as a result of weak global growth prospects. While prices are assumed to increase over the long term, the increases will be relatively small compared to the gains of the last decade. Both oil and gas prices increase on average over the outlook period. Oil prices are forecast to decline until and increase thereafter. The price of oil is expected to exceed its previous peak of about US$1 per barrel by. The price of natural gas fails to return to its previous price peak. The relatively weak performance of natural gas reflects the increased supply of gas that is expected to be obtained from shale gas deposits across North America. Canada s key trading partners show a strengthening in the medium term as their economies continue their recovery from the recent recession. U.S. growth strengthens to 2.8 percent in and averages 2.9 percent September

2 per year over the medium term. The Eurozone is expected to grow by 1.1 percent in and then average 1.5 percent over the medium term. Expected growth in Japan will be slightly lower, averaging 1.3 percent annually. China s economic growth remains relatively strong, but its rate is lower than that observed over the past 1 years. The Canadian economy is forecast to grow by 2.1 percent in, up slightly from 2. percent in. A still recovering global economy in combination with an almost 1 percent depreciation of the Canada-U.S. exchange rate will cause export growth to strengthen and put downward pressure on import growth. GDP 1 growth averages 2.4 percent per year over the medium term, but then slows to 1.7 percent over the long term as the impact of the exchange rate depreciation diminishes and natural resource-related major project investment slows. In Quebec, economic growth is expected to average around 1.8 percent over the medium term to, but then slow slightly to average 1.5 percent over the long term as overall investment cycles down. CONSTRUCTION INVESTMENT TRENDS Non-residential construction investment (see Figure 1) slows in and, but is expected to resume growth in as new mining and pipeline projects are scheduled to start. Investment in residential construction is expected to rise steadily over the medium term to driven by net in-migration and rising household formations 2. Slower growth is expected over the long term as migration eases off. Table 1 provides a summary of investment across these sectors. Table 1: Construction investment ($27 millions*) f** f f f f f Non-residential investment (excluding maintenance) 23,354 23,132 25,31 26,772 26,72 25,732 % change -3.% -1.% 9.4% 5.8% -.3% -3.6% Building 9,484 9,59 9,921 1,437 1,656 1,857 % change -.4%.3% 4.3% 5.2% 2.1% 1.9% Industrial 1,99 2,134 2,427 2,582 2,53 2,55 % change -2.1% 7.2% 13.7% 6.4% -3.1% 1.9% Commercial 3,515 3,731 3,971 4,21 4,493 4,675 % change 4.9% 6.1% 6.4% 5.8% 7.% 4.1% Institutional 3,979 3,643 3,523 3,653 3,659 3,632 % change -3.8% -8.4% -3.3% 3.7%.2% -.7% Engineering 13,87 13,623 15,389 16,335 16,46 14,875 % change -4.7% -1.8% 13.% 6.1% -1.8% -7.3% Highways/bridges 4,121 3,969 3,981 3,988 3,95 3,961 % change -1.2% -3.7%.3%.2% -2.1% 1.4% Continued on next page 1 Gross domestic product 2 Household formation refers to the change in the number of households (persons living under one roof or occupying a separate housing unit) from one year to the next. It is the means by which population growth is transformed into demand for new housing. Preliminary Investment Trends Report Quebec: 2

3 f** f f f f f Other engineering*** 9,749 9,654 11,49 12,348 12,141 1,914 % change -6.1% -1.% 18.2% 8.2% -1.7% -1.1% Maintenance 7,225 7,371 7,51 7,682 7,899 8,131 % change 2.4% 2.% 1.9% 2.3% 2.8% 2.9% Residential investment 19,497 19,574 2,556 2,717 2,845 21,144 % change 1.4%.4% 5.%.8%.6% 1.4% New housing 7,611 7,584 8,315 8,248 8,179 8,297 % change 2.4% -.4% 9.6% -.8% -.8% 1.4% Renovations 11,886 11,99 12,241 12,469 12,666 12,847 % change.7%.9% 2.1% 1.9% 1.6% 1.4% * $27 millions indicates that the money values are in year 27 dollars (base year), that is, adjusted by inflation. This is used to calculate the real physical change of the values, factoring out growth due to increases in prices. Totals may not add up due to rounding. ** f refers to forecasted investment. *** Other engineering includes the construction of water, wastewater, oil and gas, pipelines, mining, power and communications-related facilities. Non-residential Non-residential construction slowed in, but resumes growth from to, and then cycles down as major projects peak and wind down. This trend is driven largely by ongoing and proposed major engineering project schedules (bridge/roadwork, mining, electric power and pipeline). ICI (industrial, commercial and institutional) building construction investment is expected to grow steadily across the outlook period. Figure 1: Non-residential construction investment ($27 millions) 3, 25, 2, 15, 1, 5, Engineering ICI building* * ICI building refers to industrial, commercial and institutional building. Preliminary Investment Trends Report Quebec: 3

4 The trend in engineering investment is driven primarily by major projects. Proposed mining developments and the Energy East Pipeline are key projects driving investment over the medium term. Engineering construction slows over the long term as known major projects wind down. Construction investment in roads, highways and bridges remains relatively unchanged across the outlook period with overall activity well above historical levels. The Champlain Bridge and related road work is a key driver early in the outlook period. Figure 2: Non-residential engineering construction investment ($27 millions) 14, 12, 1, 8, 6, 4, 2, Roads/highways/bridges Other engineering ICI building construction investment (see Figure 3) rises steadily across the outlook period. The strongest growth is in commercial construction, supported by healthy economic conditions and sustained migration into the province. Following several years of strong investment, institutional construction peaked in and is expected to decline over the near term to. Moderate growth resumes over the long run as government fiscal restraints ease. Industrial construction investment rises over the medium term driven by activity in major mining, utility and manufacturing projects, but then slows to more moderate growth over the long run as known major projects wind down. Figure 3: Non-residential building construction investment ($27 millions) 6, 5, 4, 3, 2, 1, Industrial building Commercial building Institutional building Preliminary Investment Trends Report Quebec: 4

5 Residential Household formation increases in driven by population growth led by in-migration, but then remains relatively unchanged over the medium term to. Formations and housing starts cycle down over the long term as population growth slows. New residential construction investment follows the housing starts trend. Renovation investment rises steadily across the outlook period (see figures 4 and 5). Figure 4: Housing starts and household formation 7, 6, 5, 4, 3, 2, 1, Household formation Housing starts Figure 5: New housing and renovations investment ($27 millions) 16, 14, 12, 1, 8, 6, 4, 2, New housing Renovations Preliminary Investment Trends Report Quebec: 5

6 SUMMARY Broad labour market implications may be drawn from expected investment trends. The schedules of major mining, utility, pipeline and manufacturing projects drive the demand for trades and occupations in engineering construction, as well as industrial building construction. Market conditions may tighten in and as major projects peak, but then ease off as projects wind down. Demand for trades involved in commercial and institutional building construction is expected to remain steady. In residential, mild fluctuations in new housing investment and labour demand may be offset by more steady growth and employment for renovation work. These market conditions are derived from an investment scenario that is based on a preliminary set of assumptions about current economic conditions and proposed new projects, sustaining capital and ongoing maintenance investment. These drivers may be prone to market uncertainties, however. BuildForce Canada continually monitors the economic environment and proposed major construction projects. Any updates will be incorporated into the upcoming Construction and Maintenance Looking Forward report of labour market conditions, to be released in early. Timely construction forecast data is available online at Create customized reports on a broad range of selected categories within sector, trade or province covering up to 1 years. For more information, contact: BuildForce Canada Phone: info@buildforce.ca September Funded by the Government of Canada Preliminary Investment Trends Report Quebec: 6