Analysis - Second Quarter 2010

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Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the second quarter of 2010, the four largest quarterly price changes among the commodities used in construction were four increases, of which two were in architectural components and two were in structural components. These four increases were: plywood from Douglas fir (+10.4%); particle-board and wafer-board (+10.1%); concrete reinforcing bars, not fabricated (+9.6%) and plywood from other softwood (+8.8%).

Prices for plywood from Douglas fir, which had risen in February and March, continued to rise in April and May, but fell back sharply in June.

Prices for particle-board and wafer-board, which had shown increases in two of the months in the first quarter, continued to rise in April and May, levelling off in June.

Prices for concrete reinforcing bars, not fabricated, which had risen sharply at the end of the first quarter, continued their increase in April but levelled off in May and June.

Prices for plywood from other softwood which had shown two monthly declines in the first quarter, rose strongly in April and May but dropped sharply in June.

The four largest year-over-year changes were all increases, two in the architectural components group, one in the structural components group and one in the electrical components group. These changes were: particle-board and wafer board (+25.6%); plywood from other softwood (+14.1%); plywood from Douglas fir (+13.6%); and insulated wire and cable, not exceeding 1000 volts (+9.3%).

The year-over-year change in the price of particle and wafer board continued to rise throughout the quarter. It had hit a low in September 2010. The year-over-year change has increased from -12.3% in the third quarter of 2009 to 25.6 in the second quarter of 2010.

The year-over-year change in the price of plywood from softwood other than Douglas fir increased in April and May which saw monthly increases in its price, but fell back sharply in June which saw a decrease. Despite the decrease in June, the year-over-year change increased from 1.3% in the first quarter of 2010 to 14.1% in the second quarter. It had fallen to -12.7% in the last quarter of 2009.

The year-over-year change in the price of plywood from Douglas fir followed a similar pattern to that for other plywood from softwood, increasing in April and May but dropping in June. As a result, the year over year change for the quarter rose from -0.5% in the first quarter of 2010 to 13.6% in the second quarter. It had fallen to -14.4% at the end of 2009.

The year-over-year change in the price of insulated wire and cable, not exceeding 100 V declined throughout the quarter which saw monthly price declines in all three months. Consequently, the year-over-year change fell to +9.3% in the second quarter from +15.3% in the first quarter. Prior to the second quarter, the annual change had been rising since the last quarter of 2008 when it reached -13.6%. For their part, copper concentrates, an important input into the production of insulated wire and cable, fell sharply in April and May, recovering somewhat in June. Media reports attributed the decline in copper prices to concern over slowing demand in China and the debt crisis in Europe.

Construction Union Wage Rates Index

(See table 4)

In the second quarter of 2010 the Canada Total Construction Union Wage Rates Index (including supplements) increased by 0.8% from the previous quarter, and was 2.3% higher compared with the second quarter of 2009.

On a regional basis, the index for the Prairie Region registered the highest quarterly change (+2.2%) followed by the Atlantic Region (+1.7%) and the British Columbia Region (+1.4%). The Quebec and Ontario Regions remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) increased 0.7% in the second quarter of 2010. The Atlantic Region (+0.8%), Quebec (+0.9%), Ontario (+0.6%), the Prairie Region (+0.7%) and British Columbia (+0.9%) all posted increases.

Increased material and labour costs contributed to increases in the Atlantic Region. St. John’s (+1.4%), Saint John, Fredericton and Moncton (+0.9%) and Halifax (+0.2%) posted increases this quarter, while Charlottetown (-0.6%) posted a decrease.

In Quebec, both Montréal (+1.0%) and Québec (+0.6%) registered increases. Increased land developments costs were the primary reason for the increases in both metropolitan areas.

In Ontario, all but two metropolitan area recorded increases this quarter. London (+1.7%) and Ottawa-Gatineau (+1.4%) lead the way, followed by Hamilton as well as Toronto and Oshawa (both up +0.5%).

Windsor as well as Greater Sudbury and Thunder Bay recorded the only decreases in Ontario this quarter (both down -0.2%) as builders lowered their prices to encourage sales.

In the Prairie Region, Regina (+3.8%), Winnipeg and Saskatoon (both up +1.6%), as well as Calgary (+0.5%) and Edmonton (+0.3%), all recorded increases this quarter.

Across the Prairie Region advancements were primarily the result of increased material costs.

In British Columbia, Vancouver (+1.0%) posted an increase as market conditions continued to improve. Victoria (+0.1%) showed a small increase as builders raised their prices in highly sought after areas of the city. This was the first increase in Victoria since the first quarter of 2008.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction rose 1.3% in the second quarter compared with the previous quarter. The quarterly increase can be attributed mainly to higher labour costs and improved market conditions in the building construction market. This was the first quarterly increase since the third quarter of 2008.

The seven census metropolitan areas (CMAs) surveyed reported quarterly increases in the second quarter, with Edmonton (+3.3%) recording the largest quarterly gain.

Year over year, the composite price index for apartment building construction was down 0.6%. Of the CMAs surveyed, Vancouver (-3.2%) and Calgary (-2.3%) recorded the largest declines, while Ottawa–Gatineau, Ontario part (+3.2%), posted the largest increase.

Non-residential Building Construction Price Index

(See table 7)

The composite price index for non-residential building construction increased by 1.4% in the second quarter compared with the previous quarter. The quarterly increase can be attributed mainly to increases in labour costs and improved market conditions in the non-residential building construction market. This was the first quarterly increase since the third quarter of 2008.

All of the seven census metropolitan areas (CMAs) surveyed reported quarterly increases, with Edmonton (+3.3%) recording the largest gain.

Year-over-year, the composite price index for non-residential building construction was down 0.6%. Of the CMAs surveyed, Vancouver (-4.3%) recorded the largest decrease while Ottawa–Gatineau, Ontario part (+3.1%) and Edmonton (+2.8%) recorded the largest increases.

Machinery and Equipment Price Index

(See table 8)

The Machinery and Equipment Price Index (MEPI) fell by 0.9% in the second quarter. The import component fell by 1.3% over this period, while the domestic component declined by 0.1%. Compared with the second quarter of 2009, the total MEPI was down by 8.3% in the second quarter, with the import component falling by 12.2% and the domestic component declining by 1.5%.

Except for fishing, hunting and trapping (+1.0%), all other industries recorded decreases in prices of machinery and equipment purchased in the second quarter. Finance, insurance and real estate (-1.3%) contributed the most to the total MEPI quarterly decline. The sector's subcomponents that contributed to the decrease included real estate and rental and leasing services (-1.6%) and finance and insurance (-1.2%). The second largest contributor to the total quarterly decrease was manufacturing industries, with a quarterly decline of 0.6%.

Among commodities, price decreases for automobiles, excluding passenger vans (-2.1%) and computers and peripherals equipment such as terminals, printers and storage devices (-2.6%) were the largest contributors to the quarterly decline.

The Canadian dollar appreciated 1.3% against the US dollar in the second quarter, while year over year, it gained 13.6% 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 on the index.

Electric Utility Construction Price Index

(See table 9)

Annual 2009 (revised) and first half of 2010 (preliminary)

Construction costs for the distribution systems series increased by 1.0% in first half of 2010 compared with the 2009 annual index. Higher costs for labour (+4.4%) and overhead conductors (+7.2%) were the major contributors to the advance.

Construction costs for the transmission line system series rose 0.9% during the first half of 2010, while the transmission line component increased 2.0%, largely as a result of installation labour (+4.4%). The substation component edged up 0.2% in the first half of 2010, led by an 8.1% increase in the power cables and buswork component.

Compared with 2008 final data, the revised 2009 data show increases for both the distribution systems (+0.5%) and the transmission line system series (+0.6%). The transmission line component declined by 0.7%, while the substation component increased by 1.4%.

Consulting Engineering Services Price Index

(See table 10)

2008 (preliminary data)

The Consulting Engineering Services Price Index (CESPI) is now available for 2008. 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 Consulting Engineering Services Price Index for 2008 was 135.2 (1997=100), up 2.1% from the revised 2007 index of 132.5.

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 137.1 (2001 =100), an increase of 2.9% over the revised annual index of 133.3 for 2008. The revised indexes for 2007, 2006, 2005, 2004, 2003 and 2002 were 125.0, 120.0, 113.1, 107.8, 104.8 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.