Analysis - First Quarter 2009

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Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the first quarter of 2009, the four largest quarterly price changes amongst important commodities used in construction were four decreases. These decreases were: concrete reinforcing bars, not fabricated (-8.2%), insulated wire and cable, not exceeding 1000 volts (-6.2%), plywood from Douglas fir (-5.1%) and plywood from other softwood (-4.4%).

Prices for concrete reinforcing bars, not fabricated, which had been declining since September 2008, briefly levelled off in January 2009, but resumed their fall in February and fell faster in March. Competitive factors were recorded by respondents as having played a part in the price declines. The price of iron and steel scrap, which is of some importance as an input into the production of reinforcing bars, and had been declining since August, saw a brief rise in January, which was almost offset by decreases in February and March..

The price level for and insulated wire and cable, not exceeding 1000 volts, which had declined throughout the fourth quarter of 2008, continued to fall in the first quarter of 2009. This was despite copper price increases throughout the quarter. Nevertheless, respondents referred to both declining material prices and competitive reasons as playing a role in their pricing decisions.

Prices for plywood from Douglas fir, which were down in November and December, continued to decline in January and February and levelled off in March.

Prices for plywood from other softwood, which had shown little change in the first two months of the fourth quarter, declined in December, January and February, levelling off in March.

The largest year-over-year changes included two increases and three declines. The increases were for structural steel shapes (+17.8%) and metal roofing and siding (+8.0%). The declines were in insulated wire and cable, not exceeding 1000 volt (-13.3%), concrete reinforcing bars, not fabricated (-11.3%) and plywood from Douglas fir (-8.0%).

The year-over-year change in the price level of structural steel shapes continued to decline throughout the first quarter. The result is that the annual change in prices dropped from an average of +32.8% in the last quarter of 2008 to an average of +17.8% in the first quarter of 2009.

The year-over-year change in the price of metal roofing and siding gradually declined during the first quarter as the price level continued to remain unchanged. The annual change moved down from an average of +8.2% in the fourth quarter to one of +8.0% in the first quarter.

The year-over-year decline in the price of insulated wire and cable, not exceeding 1000 volts dropped sharply at the beginning of the quarter, only to rise in February and March. The result was that the average annual change fell only from -13.6% in the fourth quarter of 2008 to -13.3% in the first quarter of 2009.

The year-over-year change in the price of concrete reinforcing bars, not fabricated, which had declined throughout the last quarter of 2008, edged up marginally in January but declined sharply in February and March. As a result, the average year-over-over price change dropped from -0.8% in the fourth quarter of 2008 to -11.3% in the first quarter of 2009. It had risen to 28.7% in the third quarter of 2008.

The year-over-year decline in the price of plywood from Douglas fir edged up from -8.2% in the last quarter of 2008 to -8.0% in the first quarter of 2009. It had fallen to -9.2% in the third quarter of 2008. During the quarter, the year-over-year change fluctuated, dropping sharply in January and recovering during the next two months.

Construction Union Wage Rates Index

(See table 3)

In the first quarter of 2009 the Canada Total Construction Union Wage Rates Index (including supplements) remained unchanged at 146.5 (1992=100) compared with the previous quarter, and was 2.1% higher compared with the first quarter of 2008.

On a regional basis, the Ontario Region registered the only quarterly change (0.1%). The Atlantic Region, the Quebec Region, the Prairie Region and the British Columbia Region all remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) declined 1.5% in the first quarter of 2009. This is the second consecutive quarterly decline and the largest decrease since the first quarter of 1991 (-3.3%). Increases were seen in the Atlantic Region (+1.3%), and Quebec (+0.9%). The Prairie Region (-4.3%) and British Columbia (-3.6%) both registered decreases, while Ontario remained unchanged.

Material and labour costs along with increased land values contributed to increases in the Atlantic Region. St. John’s (+2.2%) had the largest increase followed by Saint John, Fredericton and Moncton (+1.9%), Charlottetown (+0.8%) and Halifax (+0.2%).

In Quebec, both Québec City (+3.0%) and Montréal (+0.6%) registered increases. Material and labour costs and elevated land values resulted in the price increases in Québec City. Higher material, labour and operating costs contributed to the price increases in Montréal.

In Ontario, London (+0.5%), Kitchener (+0.4%), Ottawa-Gatineau (+0.2%), Windsor (+0.2%) and Greater Sudbury and Thunder Bay (+0.1%) recorded increases. Declines were observed in St. Catharines-Niagara (-0.7%), Hamilton (-0.3%) and Toronto and Oshawa (-0.1%) due in part to competitive market conditions.

In the Prairie Region, Edmonton (-5.4%), Calgary (-4.2%) and Saskatoon (-1.5%) posted decreases which were generally attributed to decreased labour costs and lower land development costs. Increases were reported in Regina (+0.6%) while Winnipeg remained unchanged from last quarter. Price increases were mainly caused by rising material costs as well as increased land development costs.

In British Columbia, Vancouver (-3.6%) and Victoria (-3.1%) both showed declines as builders reported continuing slow market conditions.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction stood at 138.2 (2002=100) in the first quarter, down 4.7% from the previous quarter. The quarterly decrease was mostly the result of declines in construction material prices and competitive conditions, due to a weaker building construction market, most notably in Western Canada.

Among the seven census metropolitan areas (CMAs) surveyed, Vancouver (-10.5%) recorded the largest quarterly decrease while Montréal, which reported no change, was the only CMA not to register a decrease.

Year-over-year, the composite price index for apartment building construction was down 2.3%. Decreases were recorded in Vancouver (-11.6%), Edmonton (-6.4%) and Calgary (-0.1%), while Montréal (+4.4%) recorded the largest 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 4.2% to 145.1 (2002=100) in the first quarter compared with the previous quarter. The quarterly decrease was mostly the result of declines in construction material prices and competitive conditions due to a weaker non-residential building construction market, most notably in Western Canada.

Among census metropolitan areas (CMAs), Vancouver (-10.7%) recorded the largest quarterly decrease while Montréal (+0.4%) had the only increase of the seven CMAs surveyed.

Year-over-year, the composite price index for non-residential building construction was up 1.0%. Decreases were recorded in only two CMAs, Vancouver (-9.1%) and Edmonton (-4.7%), while Montréal (+6.2%) recorded the largest 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 102.8 (1997=100) in the first quarter of 2009, up 2.1% from the fourth quarter of 2008. The import component index rose 3.0%, while the domestic index increased by 0.4%.

Compared with the first quarter 2008, the total MEPI was up 19.0%, with the import index increasing by 28.4%, while the domestic index rose by 4.8%.

The Canadian dollar lost 2.6% of its value against the US dollar in the first quarter of 2009. Variations in exchange rates can have a strong influence 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 first quarter. The manufacturing sector (+2.2%) 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 (+2.3%), primary metal and fabricated metal product manufacturing (+2.1%) and paper manufacturing (+1.8%). The second largest contributor to the total quarterly increase was finance, insurance and real estate (+1.7%).

Among commodities, price increases for other industry specific machinery (+2.7%) and automobiles, excluding passenger vans (+1.9%) 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.