Investment in building construction in Canada is increasing, but it’s all due to inflation

0

Canadian investment in building construction is skyrocketing. Typically, the leading indicator would mean that a robust real estate market is ahead. That may not be the case this time around, depending on Statistics Canada (Stat Canada). Once the agency adjusts to inflation, investment in building construction contracts. All of the increase in investment (and more) has just been unproductive inflation.

Canadian investment in construction jumps 4% after inflation

The total investment in building construction seems to be much higher. In November, all segments reached $19.1 billion, down 0.8% from the previous month. Compared to last year, the value is 10.9% higher. The monthly dips aren’t that big at the end of the year since the winter will do that. We’re looking for year-over-year annual growth, and 10.9% is huge. However, there is a small catch.

Growth in Canadian investment in building construction

The 12-month percentage change in the value of residential building construction, in current and real terms (adjusted for inflation).

Source: Statistics Canada; Live better.

Canadian investment in building construction does not really increase when adjusted for inflation. Monthly growth for November drops to -0.7%, actually contracting. Compared to the previous year, this is 3.9% less than the same month. Statistics Canada calculations show that an annual increase of 10.9% corresponds to a contraction of 3.9% adjusted for inflation. Lots of takeaways here, but the impact of inflation stands out the most.

Real Canadian investment in residential construction fell 5%

Breaking down the construction of real estate investments, the majority were for residential buildings. The segment accounted for $14.1 billion in investments in November, down 1.3% from the previous month. Compared to the previous year, the month is higher by 11.89%. Robust growth disappears once inflation is taken into account.

Real investment (adjusted for inflation) in residential construction is contracting further. Monthly growth turns negative in November, falling 1.2% from the previous month. Annual growth also fell by 4.8% compared to the same month of the previous year. Again, significant growth, but everything is eaten away by inflation.

Actual non-residential building is down 1.8% from a year ago

Investment in non-residential buildings includes commercial, institutional and industrial buildings. The segment reached $5.0 billion in November, up 0.5% from the previous month. It was 8.5% higher than the same month of the previous year. Unlike residential investment, this area of ​​investment has not grown like housing. No need for infrastructure or shopping apparently.

Investment in non-residential construction shows weaker growth when adjusted for inflation. In real terms, November’s figures were 0.5% higher than the previous month. Annual growth is 1.8% lower than the same month last year. Inflation turns growth into contraction, but not to the same extent as residential.

Stat Can’s adjustments show that inflation has a bigger impact than the headline CPI suggests. As a result, investment capital will not produce as many positive economic benefits. This shows how unproductive high “transient” inflation has become. Especially if it’s not temporary.

Share.

Comments are closed.