Analysis – Second quarter 2012

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Industrial Product Price Index, Selected ConstructionMaterials Series

(See Table 2)

In the second quarter of 2012, the four largest quarterly price changes among the main commodities used in construction were three increases and one decrease in the architectural and "other" groups. Plywood, Douglas fir (+9.2%) posted the strongest increase, followed by plywood, softwood excluding Douglas fir (+9.1%) and building paper, coated (+6.0%). The largest decrease was in diesel fuel (-5.0%).

With this 9.2% increase, prices for plywood, Douglas fir were up for a third straight quarter. Prices had increased 0.9% in the fourth quarter of 2011 and 2.5% in the last quarter.

Prices for plywood, softwood excluding Douglas fir (+9.1%) rose for a fourth consecutive quarter. The increase was bigger in the second quarter of 2012 compared to the three previous quarters (+2.0%, +1.5% and +1.8% respectively).

After experiencing a decline in the first quarter of 2012 (-6.7%), prices for building paper, coated rebounded with 6.0% growth. This was the largest increase since the fourth quarter of 2008.

In the second quarter of 2012, prices for diesel fuel fell 5.0%, the first decrease since the third quarter of 2011.

Compared with the second quarter of 2011, the four biggest price changes among the main commodities used in construction were all increases in the architectural and structural groups. Plywood, softwood excluding Douglas fir (+15.0%), plywood, Douglas fir (+12.5%), lumber and other wood products (+5.4%) and structural shapes, steel including fabricated (+5.4%) posted the largest advances.

Prices for plywood, softwood excluding Douglas fir, when compared with the same quarter the previous year, continued to climb, with a 15.0% increase. It was the third consecutive year-over-year increase.

Compared with the second quarter of 2011, prices for plywood, Douglas fir rose 12.5%, up for a second straight quarter. Prices had increased 1.2% in the first quarter of 2012, on a year over year basis.

Prices for lumber and other wood products were up 5.4% compared with the same quarter a year earlier, posting a second straight year-over-year increase. Prices had risen 0.5% in the first quarter of 2012.

Compared with the second quarter of 2011, prices for structural shapes, steel including fabricated posted an advance of 5.4%. It was a seventh consecutive year-over-year increase. In the previous three quarters, prices had risen 4.5%, 13.8% and 10.0%, respectively.

Construction Union Wage Rates Index

(See table 4)

The Canada Total Construction Union Wage Rates Index (including supplements) increased by 1.4% in the second quarter of 2012. It increased 2.3% compared with the second quarter of 2011.

On a regional basis, the index for Québec registered the highest quarterly change (+1.9%), followed by Ontario (+1.7%), the Atlantic Region as well as the Prairie Region (both +1.1%), and British Columbia (+0.4%).

New Housing Price Index

(See table 5)

The New Housing Price Index (2007=100) increased 0.7% in the second quarter of 2012 following a 0.6% increase the previous quarter. The Atlantic Region (+0.2%), Québec (+0.3%), Ontario (+1.2%) and the Prairie Region (+0.7%) all posted increases, while British Columbia (-0.2%) recorded its fourth consecutive quarterly decrease.

In the Atlantic Region, Halifax (+0.4%) and St. John's (+0.3%) were the two metropolitan regions to post increases from last quarter due to market conditions and higher labour costs. Charlottetown (-0.3%) and the aggregated metropolitan regions of Saint John, Fredericton and Moncton (-0.2%) recorded decreased prices in the second quarter of 2012.

In Québec, both Québec (+0.8%) and Montréal (+0.2%) recorded price increases in the second quarter as a result of market conditions.

Market conditions, increased material and labour costs, as well as higher land development costs contributed to the increases in Ontario. The combined metropolitan regions of Toronto and Oshawa (+1.3%) recorded the largest quarterly price advance. Increases were also observed in Kitchener-Cambridge-Waterloo as well as in Greater Sudbury and Thunder Bay (both +1.0%), Hamilton (+0.9%), Ottawa -Gatineau (+0.8%), London (+0.6%), St. Catharines-Niagara (+0.5%) and Windsor (+0.2%).

Higher land developments costs as well as increased material and labour costs contributed to the increases in the Prairie Region this quarter. Winnipeg and Regina (both +1.2%), Saskatoon (+0.8%), Calgary (+0.7%) and Edmonton (+0.6%) all showed increases from last quarter.

In British Columbia, prices decreased in Victoria (-0.8%) as builders recorded lower negotiated selling prices while Vancouver remained unchanged from last quarter.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction increased 0.6% in the second quarter compared with the previous quarter. The quarterly increase was mainly a result of higher labour costs.

All seven census metropolitan areas (CMAs) surveyed reported quarterly increases, ranging from 0.2% in Montréal to 1.0% in both Calgary and Edmonton.

Year over year, the composite price index for apartment building construction was up 2.8%. Of the CMAs surveyed, Edmonton (+4.6%) and Calgary (+4.5%) recorded the largest year-over-year increases, while Toronto (+2.0%) recorded the smallest gain.

Non-residential Building Construction Price Index

(See table 7)

The composite price index for non-residential building construction rose 0.6% in the second quarter compared with the previous quarter. The quarterly increase was mainly a result of higher labour costs.

All of the seven census metropolitan areas (CMAs) surveyed reported quarterly increases, ranging from 0.3% in Montréal to 0.8% in both Edmonton and Calgary.

Year over year the composite price index for non-residential building construction rose 3.1%. Of the CMAs surveyed, Edmonton (+4.2%) and Calgary (+4.0%) posted the largest year-over-year increases, while Halifax (+1.9%) recorded the smallest gain.

Machinery and Equipment Price Index

(See table 8)

The Machinery and Equipment Price Index (MEPI) rose 0.8% in the second quarter compared with the previous quarter. The import component was up 1.2% over this period, while the domestic component increased 0.1%.

All industries posted increases in prices of machinery and equipment purchased in the second quarter. The largest contributor to the total MEPI quarterly increase was manufacturing (+0.9%), with the transportation equipment manufacturing sub-component advancing 0.9% and the paper manufacturing sub-component up 1.0%. The second largest contributor to the quarterly increase was finance, insurance and real estate (+0.5%).

On a commodity basis, most commodities posted price increases in the second quarter, with the other industry specific machinery (+1.1%) and construction machinery (+2.0%) contributing the most to the quarterly increase of the total MEPI.

The Canadian dollar depreciated 0.9% against the US dollar in the second quarter compared with the previous quarter. Variations in exchange rates can have a strong influence on the MEPI given the high weight that imported machinery and equipment has on the index.

Compared with the second quarter of 2011, the total MEPI increased 4.4%, with the import component rising 6.5% and the domestic component up 1.4%. The movement in the import component was partly influenced by the year-over-year change in the Canadian dollar (-4.2%) against the US dollar.

Electric Utility Construction Price Index

(See table 9)

First half of 2012

Construction costs for electric utility distribution systems series increased by 0.9% during the first half of 2012 compared with the 2011 annual index. Higher costs for labour (+3.9%) and construction indirects, which includes engineering, administration and overheads (+2.1%), were the major contributors to the increase of the index.

In the first half of 2012, construction costs for the transmission line system series rose 1.4%, while the transmission line component increased 0.6%, largely as a result of installation labour (+3.9%). The substation component increased by 1.8%, led by a 2.1% increase in station equipment costs.

Consulting Engineering Services Price Index

(See table 10)

2010

The Canada total Consulting Engineering Services Price Index increased 4.1% in 2010 compared with 2009.

Prices rose for all specializations, except environmental services, ranging from gains of 1.5% for other engineering services, to 8.9% for buildings.

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 2011 was 145.5 (2001 =100), an increase of 3.2% over the revised annual index of 141.0 for 2010. The indexes for 2009, 2008, 2007, 2006, 2005, 2004, 2003 and 2002 were 136.7, 133.3, 125.0, 120.0, 113.1, 107.8, 104.8 and 102.3 respectively.