Analysis - Fourth Quarter 2009

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Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the fourth quarter of 2009, the four largest quarterly price changes amongst the most important commodities used in construction were three decreases and one increase, of which two were in architectural components, one was in structural components, and one was in the other components group. These three decreases were: plywood from Douglas fir (-14.7%); plywood from other softwoods (-13.0%), steel structural shapes (-10.1%). The only large increase was diesel fuel (+8.1%).

Prices for plywood from Douglas fir began to decline in September and continued to do so in October and November. In December, the prices for plywood from Douglas fir rebounded slightly. Prices for plywood from other softwoods also followed the same trend as plywood from Douglas fir. Prior to September, prices had risen for both these indexes for June, July and August.

Prices for steel structural shapes started its decline in March for four consecutive months and then rose slightly in July and August. For the rest of the months of 2009, prices were down for steel structural shapes, except for November where it rose slightly by 0.1%.

Prices for diesel fuel were down in July, September and December and up in August, October and November.

The four largest year-over-year changes were all declines, three in the structural components group and one in the other components group. These declines were concrete reinforcing bars, not fabricated, (-19.6%); structural steel shapes (-26.9%), metals sheets, strips and plates (-21.1%) and diesel fuel (-16.4%).

The year-over-year change in the price of concrete reinforcing bars, not fabricated, continued to decline in the last three months of the year for a total of 14 consecutive months.

The year-over-year change in the price of structural steel shapes, which had been tending to decrease since its peak in August 2007, continued to decline throughout the last three months of the year.

The year-over-year change in the price of metals sheets, strips and plates began to decline in May and this trend continued throughout the fourth quarter.

The year-over-year change in the price of diesel fuel, which has been declining since November 2008, continued to drop over the last three months of 2009.

Construction Union Wage Rates Index

(See table 4)

In the fourth quarter of 2009 the Canada Total Construction Union Wage Rates Index (including supplements) increased 0.1% compared with the previous quarter, and was 2.4% higher compared with the fourth quarter of 2008.

On a regional basis, the index for the Atlantic Region registered the highest quarterly change (+0.2%), followed by the Prairie Region (+0.1%).The Quebec, Ontario and British Columbia Regions remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) increased 1.0% in the fourth quarter of 2009. The Atlantic Region (+0.5%), Quebec (+1.0%), Ontario (+1.1%), the Prairie Region (+0.3%) and British Columbia (+1.8%) all posted increases.

Increased material and labour costs contributed to increases in the Atlantic Region. St. John’s (+1.1%) had the largest increase followed by Saint John, Fredericton and Moncton (+0.4%) and Halifax (+0.3%). Charlottetown posted its first decrease since the third quarter of 2008 (-0.6%).

In Quebec, both Québec (+2.0%) and Montréal (+0.8%) registered increases. Elevated land values were the primary reason for the increase in Québec. In Montreal prices rose as builders reported higher material and labour costs.

In Ontario, every metropolitian area recorded increases this quarter. Toronto (+1.4%), St. Catharines-Niagara (+1.0%) and Ottawa-Gatineau (+0.9%) lead the way, followed by Kitchener (+0.6%), Hamilton (+0.4%)and London (+0.3%).

In Toronto and Ottawa, stronger market conditions and competitive factors contributed to the increases while in St Catharines-Niagara prices rose due to higher material and labour costs.

Greater Sudbury and Thunder Bay as well as Windsor were also up 0.1% from last quarter.

In the Prairie Region, Calgary (+1.0%), Saskatoon (+0.7%), Winnipeg (+0.3%) and Regina (+0.3%) all recorded increases this quarter.

In Calgary, increases were due to improving market conditions and increased land development costs.

In Saskatoon and Winnipeg, advancements were due to increased material and labour costs.

Only Edmonton (-0.4%) posted a decrease this quarter. Although builders reported higher material and labour costs, this growth was more than offset by decreased lot prices and lower land development costs.

In British Columbia, Vancouver (+2.1%) posted an increase as consumer interest increased and market conditions continued to improve. Victoria (-0.1%) showed a small decline as builders recorded lower negotiated transaction prices.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction decreased 0.2% in the fourth quarter compared with the previous quarter. The quarterly drop in the price index was mainly due to a slight decline in the price of construction materials.

Among the seven census metropolitan areas (CMAs) surveyed, Edmonton (-1.4%) posted the largest quarterly decrease while Montréal (+0.2%) had the largest increase.

Year over year, the composite price index for apartment building construction was down 7.4%. Of the CMAs surveyed, Vancouver (-14.5%) recorded the largest decline, while Montréal (+0.8%) posted the only 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 0.4% in the fourth quarter compared with the previous quarter. The quarterly drop in the price index was mainly due to a slight decline in the price of construction materials.

Among the seven census metropolitan areas (CMAs) surveyed, Edmonton (-1.6%) posted the largest quarterly decrease, while only Montréal (+0.2%) and Halifax (+0.1%) registered increases.

Year over year, the composite price index for non-residential building construction was down 7.7%. Of the CMAs surveyed, Vancouver (-15.9%) recorded the largest decline, while Montréal (+1.2%) was the only CMA to post an 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) fell by 2.3% in the fourth quarter. The import component fell by 3.4% over the same period, while the domestic component declined by 0.3%. The total MEPI was down by 8.7% compared with the fourth quarter of 2008, with the import component declining by 13.0%, while the domestic component fell by 0.7%.

All industries recorded decreases in prices of machinery and equipment purchased in the fourth quarter. The manufacturing sector (-2.9%) 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 (-2.9%), primary metal and fabricated metal product manufacturing (-2.9%) and paper manufacturing (-2.6%). The second largest contributor to the total quarterly decrease was other services (excluding public administration), which fell 2.1%.

Among commodities, price decreases for computers and peripherals (-5.4%) and other industry specific machinery (-3.5%) were the largest contributors to the quarterly decline.

The Canadian dollar appreciated by 3.9% against the US dollar in the fourth quarter, while, year over year, it gained 14.8% 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 have in the index.

Electric Utility Construction Price Index

(See table 9)

2008 (final) and 2009 (preliminary)

Construction costs for distribution systems increased by 0.7% during 2009. The increase in the construction indirects component (+8.5%) in 2009 was the major contributor to the rise in the index. The construction indirects component is comprised of engineering, administration and overhead costs. The final 2008 data for distribution systems represented an advance of 1.0% over 2007.

Construction costs for the transmission line system series rose 1.4% in 2009 compared with a 4.3% increase for 2008. The transmission line component declined 0.5% in 2009, following a 2.2% gain in 2008. Following a 5.7% gain in 2008, the substation component increased 2.4% in 2009, largely as a result of a 3.3% advance in the station equipment sub-component.

Consulting Engineering Services Price Index

(See table 10)

2007 (preliminary data)

The Consulting Engineering Services Price Index (CESPI) is now available for 2007. 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 2007 was 133.7 (1997=100), up 4.5% from the revised 2006 index of 127.9.

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 2009 was 137.3 (2001 =100), an increase of 2.9% over the revised annual index of 133.4 for 2008. The revised indexes for 2007, 2006, 2005, 2004, 2003 and 2002 were 125.2, 120.1, 113.2, 107.9, 104.9 and 102.3 respectively.

Note: In 2009, all indexes were revised back to 2001. Calendar year averages of each input index are now used in the calculations. Also, revisions were made in the selection of a small number of inputs in order to improve the quality of the index.