Analysis - First Quarter 2010

Industrial Product Price Index, Selected Construction Materials Series

(See table 2)

In the first quarter of 2010, the four largest quarterly price changes among the construction materials series selected were four increases, of which one was in architectural components, two were in structural components, and one was in the electrical components group. These four increases were: structural steel shapes (+8.3%), particle-board and wafer-board (+4.1%), plywood from Douglas fir (+2.4%) and insulated wire and cable, not exceeding 1000 volts (+2.2%).

Prices for structural steel shapes (+8.3%), which had tended to decline from February to October, remaining little changed through the last quarter of 2009, rose strongly in January and February but declined slightly in March. According to various respondents, material costs and competitive factors played a role in the increase.

Prices for particle-board and wafer-board, which had shown little change in the last four months of 2009, jumped in January. However, in February they fell back somewhat and were unchanged in March.

Prices for plywood from Douglas fir which had begun to rise in December after three months of declines, fell back somewhat in January but more than recovered in February, remaining little changed in March.

Prices for insulated wire and cable, not exceeding 1000 volts which had risen slowly throughout the last quarter of 2009, increased in January but then remained flat in February and March. For its part, the price of copper, an important input into insulated wire and cable, rose noticeably in January but lost much of this in February and March. China’s continuing strong economy provided upward pressure on the market price for copper, while concern over how the deficits in various European countries might affect the global recovery provided countervailing force.

The four largest year-over-year changes included two declines, both in the structural components group and two increases, of which one was in the structural group and one was in the electrical group. These changes were: structural steel shapes (-18.8%), insulated wire and cable, not exceeding 1000 volts (+13.1%), concrete reinforcing bars, not fabricated, (-11.4%) and particle-board and wafer board (+10.2%).

The year-over-year change in the price of structural steel shapes, declined throughout the quarter with the result that the four-quarter drop fell from 26.9% in the last quarter of 2009 to 18.8% in the first quarter of 2010. The price increases for structural steel shapes in January and February were central to the decline in the four-quarter change.

The year-over-year change in the price of insulated ware and cable, not exceeding 100 volts rose throughout the quarter. Consequently, the four-quarter change rose to 13.1% in the first quarter from 3.8% in the last quarter of 2009. The annual change has been rising since the last quarter of 2008 when it reached -13.6%.

The year-over-year change in the price of concrete reinforcing bars, not fabricated, continued to improve throughout the first quarter of 2010. It has been rising since hitting a low in August 2008. As a result, the four-quarter change rose to -11.4%, up from -19.5% in the last quarter of 2009 and -34.3% in the third quarter of 2009. During the first quarter of 2010, the price level of concrete reinforcing bars, not fabricated, which had been little changed for six months, remained flat in January and February but rose noticeably in March.

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 2009. The four-quarter change rose to 10.2% from -5.2% in late 2009 and -12.3% in the third quarter of 2009. Contributing to the four-quarter change were price decreases in the first three months of 2009 and the price increase in January 2010.

Construction Union Wage Rates Index

(See table 4)

In the first quarter of 2010 the Canada Total Construction Union Wage Rates Index (including supplements) was unchanged from with the previous quarter, and was 3.1% higher compared with the first quarter of 2009.

On a regional basis, the index for the Atlantic Region, the Quebec Region and the Prairie Region all registered quarterly increases of +0.1%. Ontario and British Columbia Regions remained unchanged from the previous quarter.

New Housing Price Index

(See table 5)

The New Housing Price Index (1997=100) increased 0.9% in the first quarter of 2010. The Atlantic Region (+1.0%), Quebec (+0.7%), Ontario (+0.9%), the Prairie Region (+0.9%) and British Columbia (+1.4%) all posted increases.

Increased material and labour costs contributed to increases in the Atlantic Region. St. John’s (+2.4%) and Halifax (+0.3%) posted increases this quarter, while Charlottetown (-0.7%) and Saint John, Fredericton and Moncton, (-0.1%) posted decreases. This was the first decrease in Saint John, Fredericton and Moncton since the first quarter of 2007.

In Quebec, both Montréal (+0.8%) and Québec (+0.3%) registered increases. Increased material and labour costs were the primary reason for the increases in both metropolitan areas.

In Ontario, every metropolitan area recorded increases. London (+2.0%) and Ottawa-Gatineau (+1.5%) lead the way, followed by Toronto and Hamilton (both up +0.7%).

In London and Ottawa-Gatineau, increases were due to higher operating costs while in Toronto and Hamilton, strong market conditions and competitive factors contributed to the increases.

In the Prairie Region, Winnipeg (+2.3%), Saskatoon (+1.4%), Regina (+1.3%), Calgary (+0.7%) and Edmonton (+0.6%) all recorded increases this quarter. This was the first increase in Edmonton since the fourth quarter of 2007.

In Winnipeg, Saskatoon and Regina, advances were primarily the result of increased land development costs.

In Calgary and Edmonton, increases were due to increased material and labour costs as well as improving market conditions.

In British Columbia, Vancouver (+1.5%) posted an increase as consumer interest increased and market conditions continued to improve. While Victoria (-0.1%) showed a small decline as builders recorded lower negotiated transaction prices.

Apartment Building Construction Price Index

(See table 6)

The composite price index for apartment building construction decreased 0.2% in the first quarter of 2010 compared with the previous quarter. The quarterly drop was mainly a result of competitive pricing in the building construction market. Quarterly decreases have been recorded since the fourth quarter 2008.

Among the seven census metropolitan areas (CMAs) surveyed, Calgary (-1.3%) posted the largest quarterly decrease while Ottawa (+1.7%) recorded the largest increase.

Year over year, the composite price index for apartment building construction was down 2.8%. Of the CMAs surveyed, Calgary (-6.0%) and Vancouver (-5.4%) recorded the largest declines while Ottawa (+0.9%) posted the largest increase.

Non-residential Building Construction Price Index

(See table 7)

The composite price index for non-residential building construction decreased by 0.1% in the first quarter of 2010 compared with the previous quarter. This quarterly change was mainly a result of competitive pricing and continued weakness in the non-residential building construction market. Quarterly decreases have been recorded since the fourth quarter of 2008.

Among the seven census metropolitan areas (CMAs) surveyed, Ottawa (+1.6%) recorded the largest quarterly gain while Vancouver (-1.1%) posted the largest drop.

Year over year, the composite price index for non-residential building construction was down 3.7%. Of the CMAs surveyed, Vancouver (-6.8%) recorded the largest decrease while Ottawa (+0.9%) posted the largest advance.

Machinery and Equipment Price Index

(See table 8)

The Machinery and Equipment Price Index (MEPI) fell by 1.0% in the first quarter. The import component fell by 1.6% over this period, while the domestic component remained unchanged. Compared with the first quarter of 2009, the total MEPI was down by 11.6%, the import component fell by 16.7% and the domestic component decreased by 1.7%.

Except for transportation (excluding pipeline transportation), all other industries recorded decreases in prices of machinery and equipment purchased in the first quarter. The manufacturing industry (-1.2%) contributed the most to the total MEPI quarterly decline. Among the sector's subcomponents, the largest contributors to the quarterly decrease were transportation equipment manufacturing (-1.4%), primary metal and fabricated metal product manufacturing (-1.1%) and plastic and rubber products manufacturing (-2.5%). The second largest contributor to the total quarterly decrease was finance, insurance and real estate with a quarterly decline of 1.2%.

Among commodities, price decreases for other industry specific machinery (-1.9%) and automobiles, excluding passenger vans (-2.2%) were the largest contributors to the quarterly decrease.

The Canadian dollar appreciated by 1.5% against the US dollar in the first quarter, while, year over year, it gained 19.6% 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 has on the index.

Electric Utility Construction Price Index

(See table 9)

2008 (final) and 2009 (preliminary)

Construction costs for distribution systems increased by 0.7% during 2009. The increase in the construction indirects component (+8.5%) in 2009 was the major contributor to the rise in the index. The construction indirects component is comprised of engineering, administration and overhead costs. The final 2008 data for distribution systems represented an advance of 1.0% over 2007.

Construction costs for the transmission line system series rose 1.4% in 2009 compared with a 4.3% increase for 2008. The transmission line component declined 0.5% in 2009, following a 2.2% gain in 2008. Following a 5.7% gain in 2008, the substation component increased 2.4% in 2009, largely as a result of a 3.3% advance in the station equipment sub-component.

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.