Analysis - Fourth Quarter 2008

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Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the fourth quarter of 2008, the four largest quarterly price changes amongst the eighteen important commodities used in construction were three decreases and one increase. The decreases were: concrete reinforcing bars, not fabricated (-26.1%), structural steel shapes (-4.0%) and insulated wire and cable, not exceeding 1000 volts (-3.9%). The increase was for plate glass (+4.2%).

Prices for concrete reinforcing bars, not fabricated, which had begun to fall in September, continued their decline throughout the quarter. Prices dropped steeply in October and November, more slowly in December. Competitive factors were recorded by respondents as having played a part in the price declines. In addition, the price of iron and steel scrap, which is of some importance as an input into the production of reinforcing bars, was declining throughout the quarter, most steeply in October and least so in December.

Prices for structural steel shapes which had begun to fall in September, continued to decline in October and November but edged up marginally in December. As in the case of reinforcing bars, iron and steel scrap is also of some importance in the production of structural steel shapes and, as note above, was declining in the quarter.

The price level for insulated wire and cable, not exceeding 1000 volts, which had decreased in August and September, continued to decline in October but remained level in November and December. For their part, copper prices, an input into wire and cable, weakened throughout the quarter and respondents referred to both declining material prices and competitive reasons as playing a role in their pricing decisions.

The price of for plate glass which had shown a noticeable rise in September, jumped in October but only edged up only slightly in the last two months of the quarter.

The largest year-over-year changes included three increases and two declines. The increases were for structural steel shapes (+32.8%); particle-board and wafer-board (+13.1%); and metal roofing and siding (+8.2%). The declines were in insulated wire and cable, not exceeding 1000 volts (-10.8%) and plywood from Douglas fir (-8.2%).

The year-over-year increase in the price of structural steel shapes remained high throughout the quarter, despite the month-to-month declines in their price level in September and November. The end result was that the annual change in prices edged up from +31.4% in the third quarter to +32.8% in the fourth quarter.

The year-over-year change in the price of particle-board and wafer-board remained, in October and November, at about the level to which it had increased in September, and increased further in December. This was despite prices, which had risen in August and September, falling back somewhat in October and remaining relatively unchanged in November and December. Consequently, the year-over-year price change jumped from +2.7% in the third quarter to +13.1% in the fourth.

The year-over-year change in the price of metal roofing and siding rose to +8.2% in the fourth quarter from +7.9% in the third quarter, despite the price level remaining relatively unchanged from August onward.

The year-over-year decline in the price of insulated wire and cable, not exceeding 1000 volts, declined slowly throughout the quarter with the result that the annual change fell from -11.3% in the third quarter to -10.8% in the fourth quarter. It had fallen to a trough of -13.1% in the second quarter of the year.

The year-over-year decline in the price of plywood from Douglas fir went from -9.2% in the third quarter to -8.2% in the fourth quarter. This occurred as the price level edged up marginally in October and declined somewhat in November and December.

Construction Union Wage Rates Index

(See table 3)

In the fourth quarter of 2008 the Canada Total Construction Union Wage Rates Index (including supplements) remained unchanged at 144.6 (1992=100) compared with the previous quarter, and was 1.4% higher compared with the fourth quarter of 2007.

On a regional basis, the indexes for the Atlantic Region, the Quebec Region, Ontario, the Prairie Region and British Columbia all remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) declined 0.6% in the fourth quarter of 2008, down from the previous increase of 0.1%. Increases were seen in the Atlantic Region (+1.2%), and Quebec (+0.6%). British Columbia (-2.3%), the Prairie Region (-1.6%) and Ontario (-0.1%) all registered decreases. This was the first decrease reported for Ontario since the third quarter of 1996.

Material and labour costs along with increased construction and administration costs contributed to increases in the Atlantic Region. St. John’s (+3.2%) had the largest increase followed by Saint John, Fredericton and Moncton (+0.4%) and Halifax (+0.2%). Charlottetown remained unchanged from the last quarter.

In Quebec, both Québec City (+1.4%) and Montréal (+0.3%) registered increases. Material and labour costs and and elevated land values resulted in the price increase in Québec City. Higher materials and labour costs contributed to the price increase in Montréal.

In Ontario, only Kitchener (+0.3%) and Ottawa-Gatineau (+0.2%) recorded increases. Competitive market conditions in both cities attributed to the increases. Declines were observed in St. Catharines-Niagara (-0.8%), Windsor (-0.2%) and Hamilton (-0.1%) due in part to slow market conditions. Toronto and Oshawa, Greater Sudbury and Thunder Bay and London remained unchanged.

In the Prairie Region, Saskatoon (-4.5%), Edmonton (-2.1%) and Calgary (-1.5%) posted decreases which were generally attributed to poor market conditions. Increases were reported in Winnipeg (+0.6%) followed by Regina (+0.1%). The price increases were mainly caused by rising material and labour costs as well as increased land development costs.

In British Columbia, Vancouver (-2.3%) and Victoria (-1.9%) both showed declines as some builders reported slower market conditions.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction decreased 2.6% from the previous quarter to 145.0 (2002=100) in the fourth quarter of 2008. The quarterly decrease was mostly the result of the decline in construction material prices and a weakening of the building construction market.

Of the seven census metropolitan areas surveyed, Edmonton recorded the highest quarterly decrease (-6.1%), while Montréal (+0.9%) registered the largest increase.

Compared with the fourth quarter of 2007, the composite price index for apartment building construction was up 4.8%. Toronto had the largest year-over-year increase (+7.3%), while Vancouver (+0.8%) recorded the smallest increase.

Note: In the fourth quarter of 2008, the building model used to calculate the Apartment Building Construction Price Index was replaced with an updated model. Also, the base year was changed to 2002=100.

Non-residential Building Construction Price Index

(See table 7)

The composite price index for non-residential building construction decreased 2.8% in the fourth quarter to 151.5 (2002=100) compared with the previous quarter. The quarterly decrease was mostly the result of the decline in construction material prices and a weakening of the non-residential building construction market.

Compared with the fourth quarter of 2007, the composite price index for non-residential building construction was up 8.2%.

Of the seven census metropolitan areas (CMAs) surveyed, Edmonton recorded the highest quarterly decrease (-5.3%), while Montréal (+1.1%) registered the largest increase. The quarterly decrease for Edmonton was the largest recorded for this CMA since the index was first published in the first quarter of 1981.

Compared with the fourth quarter of 2007, Calgary had the largest increase (+10.4%), while Vancouver (+4.0%) recorded the smallest year-over-year increase.

Note: In the fourth quarter of 2008, the five building models used in the calculation of non-residential building construction price indexes were replaced with updated models. Also, the base year was changed to 2002=100.

Machinery and Equipment Price Index

(See table 8)

The Machinery and Equipment Price Index (MEPI) stood at 99.1 (1997=100) in the fourth quarter, up 11.7% from the third quarter of 2008. The import component index rose 17.9%, while the domestic index increased by 1.4%. Compared with the fourth quarter of 2007, the total MEPI was up 18.1%, with the import index increasing by 27.9%, while the domestic index rose by 3.3%.

The Canadian dollar lost 14.1% of its value against the US dollar in the fourth quarter of 2008. Variations in exchange rates can have a strong impact on the MEPI. This is because of the high weight that machinery and equipment imported by industries has, relative to those purchased domestically, in the index.

All industries recorded increases in prices of machinery and equipment purchased in the fourth quarter. The manufacturing sector (+12.4%) contributed the most to the total MEPI quarterly increase. Among the sector's subcomponents, the largest contributors to the quarterly increase were transportation equipment manufacturing (+12.6%), primary metal and fabricated metal product manufacturing (+12.4%) and paper manufacturing (+10.6%). The second largest contributor to the total quarterly increase was finance, insurance and real estate (+12.2%).

Among commodities, price increases for trucks, road tractors and chassis (+19.8%) and other industry specific machinery (+15.3%) were the largest contributors to the quarterly increase.

Electric Utility Construction Price Index

(See table 9)

Annual 2007 (final) and annual 2008 (preliminary)

Construction costs for distribution systems increased by 0.9% during 2008. The increase in the materials component (+1.5%) in 2008 was the major contributor to this rise in the index. The 2007 data for distribution systems represented an advance of 4.5% over 2006.

The annual 2008 construction costs for the transmission line system series rose 3.7% compared with a 4.7% increase for 2007. The transmission line component in 2008 climbed 2.2%, while in 2007 there was a 3.9% annual gain. The substation component rose by 4.6% in 2008, following a 5.2% increase in 2007, with the station equipment sub-component (+3.7%) posting the largest gain.

Consulting Engineering Services Price Index

(See table 10)

2006 (preliminary data)

The Consulting Engineering Services Price Index (CESPI) is now available for 2006. The CESPI measures the change in the total price of engineering and consulting services, as well as changes in the wage rate and realized net multiplier components. Detailed indexes are available for fields of specialization and for regional, domestic and foreign markets.

The Canada total CESPI for 2006 was 127.9 (1997=100), up 3.4% from the revised index of 123.7 for 2005.

Infrastructure Construction Price Index

An analytical price index series measuring annual changes in the cost of municipal infrastructure construction funded by development charges has been developed by Statistics Canada on behalf of the City of Ottawa. The annual index for 2008 was 132.2 (2001 =100), an increase of 5.9% over the revised annual index of 124.8 for 2007. The revised index for 2006 was 119.4 while the indexes for 2005, 2004, 2003 and 2002 were 112.8, 107.7, 105.1 and 102.2 respectively as previously published.