The latest release on the value of building permits for Canada's CMAs by Statistics Canada provides an interesting perspective on a slowing economy. The numbers show that there has been a downward trend in the total value of permits since late 2012.
Figure 1 shows the ranking by CMA in the seasonally adjusted growth of the total value of building permits and the leaders of the pack are all smaller centres - Kingston, Sudbury, Thunder Bay, St. Catharines and Barrie. These smaller cities are such that one new government building or construction project is a big deal to the local economy. Of course, that effect can be symmetric once a key project ends as the bottom five worse performers are also all smaller centres. Of more concern is the performance of the big three: Vancouver, Toronto and Montreal which together account for about half of the value of building permits.
Figure 2 plots a five month moving average of the monthly value of residential permits for the big three while Figure 3 does it for non-residential permits. Toronto and Vancouver are exhibiting the more pronounced cooling of investment intentions as demonstrated by building permits. Residential permits in Toronto peaked in early 2012 and have been trending downwards since. Non-residential permits peaked even before - in about mid 2011 and have since exhibited some ups and downs. Vancouver has also seen a drop in the average value of permits for both residential and non-residential permits over the last six months.
The more interesting case is Montreal. The moving average value of residential permits has been quite stable relative to the other two cities and has been so since late 2009. As for Montreal's non-residential building permits, well they were quite stable also up until 2011 when a large blip occurs. However, since late 2011, the 5-month moving average value of non-residential permits has been trending upwards.
The current slowdown in the Canadian economy does not seem to be hitting Montreal construction activity as hard as it might be hitting Toronto and Vancouver. I guess the more intriguing observation here is the stability of residential building permit values in Montreal at least compared to Toronto and Vancouver. For the period 2008-2013, a quick calculation of the mean and standard deviation of the monthly values of residential building permits yielded a coefficient of variation of 0.36 for Vancouver, 0.32 for Toronto but only 0.17 for Montreal. Montreal would appear to have a very stable new housing construction market.
Perhaps a basic question, but why use a 5 month moving average--wouldn't that leave subsantial seasonality unadjusted for vs 12 month MA?
Posted by: Andrew F | April 16, 2013 at 12:17 AM
Answered it myself: the figures are already seasonally adjusted.
Posted by: Andrew F | April 16, 2013 at 12:18 AM
Livio: don't tell it to The Gszette...
This being said,maybe one benefit of no longer being a `` world class city`` is that you are no longer subject to the fads of foreign investors.
Posted by: Jacques René Giguère | April 16, 2013 at 08:11 AM
Wow, what a great segue! How dare you say that Jacques! ;)
I just got back from Montreal, I spent an absolutely wonderful weekend at the NPD Convention in Montreal as a delegate for my Riding. I haven't been to Montreal since 1987 and haven't been outside Central Station since 1983. So it was in reality my first visit.
Dear God, I think I'm in love. The sights, the sounds, the architecture, the people, the culture, the language, the FOOD!!! I made the pilgrimage to Schwartz's and was delighted to have breakfast at a wonderful restaurant in the ground level of my hotel which was called Eggspectation. A perfect breakfast at a very reasonable price.
I have now been to both Toronto and Montreal and have come to the realization that Toronto is a dump. Seriously people, it sucks.
On a final note, be glad you didn't buy an observer pass to the NPD Convention, Stephen. The NPD, contrary to our reputation, strictly enforces Robert's Rules on the floor of Plenary. Delegates get desks by tradition, while by policy Observers are confined to a roped-off area at the back of the convention hall. Observers are not allowed on the Convention Floor itself as this might interfere with voting. I guarantee you would not have enjoyed yourself. Stick with CPAC, it's better.
Posted by: Determinant | April 17, 2013 at 03:54 AM
As long as TO proclaim itself to be world-class, you know it isn't . Real alphas don't crow.
TO, to me, still look like a better managed and cleaner Phoenix or Atlanta. Though ,thank heavens, it's no longer competing with Salt Lake City.
Montreal is like Copenhagen or Stockholm. Not at the forefront of power but big and rich enough to afford a lot of amenities while free enough of the power struggles to enjoy them.
Posted by: Jacques René Giguère | April 20, 2013 at 07:03 PM