BuildingTeam Construction Forecast

Mann at Work

Reed Construction Data editor Denise Mann gathers North American construction-related economic announcements from around the Web and summarizes them just for BuildingTeam Forecast readers. Your feedback and suggestions for future topics to be covered are always welcome.

Monday, July 9, 2007

Will the Bank of Canada Raise Its Overnight Rate on July 10?

Jul 9 2007 2:10PM | Permalink | Email this | Comments (0) |
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On Tuesday, watch for the Bank of Canada’s overnight rate announcement on their website. Many experts, including Reed Construction Data consulting economist John Clinkard, won’t be surprised to see a quarter-point rise.

For more about what to expect, check out Clinkard’s article “Canada’s First-Quarter Growth Exceeds Expectations”, then feel free to add your opinion to those of the experts by clicking on the “Comments” link above.

Meanwhile in the U.S., the federal funds rate and construction spending figures remained steady. While the news from the FOMC was good — the Fed left the target federal funds rate unchanged — the Census Bureau’s U.S. construction spending figures for May 2007 showed spending was up only slightly over the previous month and down year over year from 2006.

North of the border, Canadian building permits continue their upward march… Canadian building permits for May were announced on July 5, and the value “surged to its highest monthly level ever in May,” according to Statistics Canada.

For more about the overall health of the Canadian economy, check out Alex Carrick’s article entitled “Canadian government finances have rarely been better”. For a look at the future of the U.S. residential housing market, see Jim Haughey’s article “Disappearing households will keep housing starts depressed”.

For your convenience, here’s a summary of the announcements mentioned above.

Federal funds rate remains unchanged
The Federal Open Market Committee kept its target for the federal funds rate at 5.25% at it June 28 meeting, despite concern about the possibility that inflation will fail to moderate as expected. Future policy adjustments will depend on the changing outlook for both inflation and economic growth.

U.S. construction spending rises slightly in May 2007
The U.S. Census Bureau has announced that construction spending in the month of May 2007 was estimated at a seasonally adjusted annual rate of $1,176.6 billion, 0.9% above the revised estimate of $1,166.0 billion for April.

The May figure is 2.8% below the May 2006 estimate of $1,210.0 billion.

During the first five months of this year, construction spending amounted to $442.1 billion, 3.9% below the $460.1 billion for the same period in 2006.

Value of Canadian building permits surge in May 2007
Municipalities issued a total of $6.8 billion worth of permits, up 21.4% from April.

This figure is 8.5% higher than the previous high set in October 2006.

The Calgary and Vancouver metropolitan areas delivered nearly 75% of the overall gain (in terms of dollars) in May. Without these two CMAs, the total value of permits would have increased just 7.0%, instead of 21.4%.

For the first time ever, non-residential permits passed the $3-billion mark, thanks to a big increase in commercial projects.

Contractors set a record in May, taking out $3.1 billion in permits for proposed construction projects. This figure is up 55.7% from the previous month and 18.5% higher than the previous record of $2.6 billion set in January 2007.

In the residential construction sector, municipalities issued permits worth $3.7 billion, a 2.4% increase from the previous month. The value of multi-family permits slipped slightly, but single-family permits increased.

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