Analysis - Second Quarter 2009

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Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the second quarter of 2009, the four largest quarterly price changes amongst the eighteen most important commodities used in construction were three decreases, all in structural components, and one increase, which was in the architectural components group. These three decreases were: structural steel shapes (-15.2%); concrete reinforcing bars not fabricated (-8.9%) and particle-board and wafer-board (-3.1%). The increase was lath and plaster gypsum wallboard (+2.9%).

Prices for structural steel shapes, which had begun to fall in March, continued to decline throughout the second quarter. The price of iron and steel scrap, which is of some importance as an input into the production of the steel used for structural steel shapes, also declined throughout the second quarter, as did the price of iron ore. Competitive factors, material costs and the exchange rate were recorded by respondents as having played a part in the price declines.

The price level for concrete reinforcing bars not fabricated, which had begun its decline in September 2008, continued to fall throughout April, May and June. Competitive factors were recorded by respondents as having played a part in the price declines. The price of iron ore, which is of some importance as an input into the production of concrete reinforcing bars, also declined throughout the second quarter.

Prices for particle-board and wafer-board continued their decline throughout the quarter, but the pace slowed as the quarter progressed, with the result that they moved down very little in June.

Prices for lath and plaster gypsum wallboard remained unchanged throughout the quarter. The result was that the quarterly average price in the second quarter was 2.9% higher than it had been in the first quarter, which had seen a decline in January followed by increases in February and March.

The largest year-over-year changes also included three declines and one increase. The declines were for concrete reinforcing bars, not fabricated, (-34.2%); structural steel shapes (-11.7%) and plywood from Douglas fir (-9.6%). The increase was for metal roofing and siding (+12.8%).

The year-over-year change in the price of concrete reinforcing bars not fabricated, which had declined throughout the first quarter of 2009, worsened throughout the second quarter. As a result, the average four-quarter price change dropped from -11.3% in the first quarter of 2009 to -34.2% in the second quarter of 2009. The twelve-month change had risen to +28.7% in the third quarter of 2008 only to drop to -0.85% in the last quarter of 2008.

The year-over-year change in the price of structural steel shapes (-11.7%), which had been tending to decrease since its peak in August 2008, turned negative in April and continued to fall in May and June. As a result, the quarterly twelve month change fell from +17.8% in the first quarter to -11.7% in the second quarter.

The year-over-year change in the price of plywood from Douglas fir continued its decline into April, but fluctuated in May and June so that the average annual change for the quarter dropped from -8.6% in the first quarter to -9.6% in the second quarter.

The year-over-year change in the price of metal roofing and siding declined throughout the quarter, with the result the average annual change for the quarter dropped from its peak of +15.3% in the first quarter, to +12.8% in the second.

Construction Union Wage Rates Index

(See table 4)

In the second quarter of 2009 the Canada Total Construction Union Wage Rates Index (including supplements) increased 1.5% compared with the previous quarter, and was 2.6% higher compared with the second quarter of 2008.

On a regional basis, the index for the Prairie Region registered the highest quarterly change (+2.9%), followed by the Ontario Region (+1.5%), the British Columbia Region (+1.4%) and the Atlantic Region (+0.6%). The Quebec Region remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) declined 1.2% in the second quarter of 2009. Increases were seen in the Atlantic Region (+0.4%), and Quebec (+0.6%). British Columbia (-2.8%), The Prairie Region (-2.4%) and Ontario (-0.9%) all registered decreases.

Increased land values contributed to increases in the Atlantic Region. St. John’s (+0.7%) had the largest increase followed by Charlottetown (0.3%) and Saint John, Fredericton and Moncton (+0.2%). Halifax remained unchanged.

In Quebec, both Québec City (+1.2%) and Montréal (+0.4%) registered increases. Material costs and elevated land values resulted in the price increase in Québec City. Higher material and labour costs contributed to the price increase in Montréal.

In Ontario, London (+0.3%) and St. Catharines-Niagara (+0.1%) recorded increases. Declines were observed in Hamilton (-1.6%), Toronto and Oshawa (-1.1%) and Kitchener (-0.5%), due in part to competitive market conditions. Ottawa-Gatineau, Windsor and Greater Sudbury and Thunder Bay were unchanged from last quarter.

In the Prairie Region, Edmonton (-3.5%), Saskatoon (-2.2%) posted decreases which were generally attributed to decreased material and labour costs , competitive market conditions and lower land development costs. In Calgary (-1.9%), although builders reported increased material and labour costs due to new fire code regulations being implemented in the city, these increases were negated by other builders who lowered their prices to stimulate sales in a competitive market.

Regina and Winnipeg both registered increases (+0.3% each). The price increase was mainly caused by rising material costs as well as increased land development costs.

In British Columbia, Vancouver (-2.9%) and Victoria (-2.1%) 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 decreased 1.1% in the second quarter to 136.7 (2002=100) compared with the previous quarter. As was the case in 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, Edmonton (-2.8%) recorded the largest quarterly decrease while only Halifax (+0.5%) showed an increase.

Year over year, the composite price index for apartment building construction was down 6.9%. Of the CMAs surveyed, Vancouver (-15.0%) recorded the largest decrease while only Montréal (+2.3%) and Halifax (+1.5%) had increases.

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 1.9% to 142.4 (2002=100) in the second quarter compared with the first quarter. As was the case in the first 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 the seven census metropolitan areas (CMAs) surveyed, Calgary (-3.6%) recorded the largest quarterly decrease while Halifax (+0.4%) had the only increase.

Year-over-year, the composite price index for non-residential building construction was down 6.5%. Of the CMAs surveyed, Vancouver (-14.3%) recorded the largest decrease while only Montréal (+3.6%) and Halifax (+1.9%) showed increases.

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) fell by 4.6% in the second quarter of 2009. The import component fell by 6.6% over this period, while the domestic component declined by 0.5%. Compared with the second quarter of 2008, the total MEPI increased by 12.9%, with the import component rising by 18.1%, while the domestic component increased by 4.6%.

All industries recorded decreases in prices of machinery and equipment purchased in the second quarter. The manufacturing sector (-4.7%) contributed the most to the total MEPI quarterly decline. Among the sector's subcomponents, the largest contributors to the quarterly decrease were transportation equipment manufacturing (-4.5%), primary metal and fabricated metal product manufacturing (-5.0%) and paper manufacturing (-4.0%). The second largest contributor to the total quarterly decrease was finance, insurance and real estate (-4.7%).

Among commodities, price declines for other industry specific machinery (-5.5%) and computers and peripherals equipment such as terminals, printers and storage devices (-10.8%) were the largest contributors to the quarterly decrease.

The Canadian dollar appreciated by 6.7% against the US dollar in the second quarter of 2009, while, year over year, it lost 13.5% against its US counterpart. Variations in exchange rates can have a strong influence on the MEPI given the high weight that imported machinery and equipment has in the index.

Electric Utility Construction Price Index

(See table 9)

Annual 2008 (revised) and the first half of 2009 (preliminary)

Construction costs for distribution systems fell by 0.3% during the first half of 2009. The decrease in overhead conductors (-6.8%) and labour (-3.1%) for this period were the major contributors to the decline in the index. The 2008 data for distribution systems show an advance of 0.9% over 2007.

Construction costs for the transmission line system series rose 1.4% during the first half of 2009, compared with a 3.7% increase in 2008. The transmission line component declined 0.3% in the first half of 2009, following a 1.9% gain in 2008. The substation component rose by 2.4% in the first half of 2009, following a 4.9% increase in 2008, 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.