CMD Canada vice president and general manager Mark Casaletto and Buildforce Canada executive director Rosemary Sparks were co-presenters for the Construction Industry Forecast session held on March 26 at the annual Canadian Construction Association conference in San Antonio, Texas.
Casaletto began by saying there is a lot going on globally such as conflict and political unrest, which tends to make predicting short-term results difficult. Volatile oil prices have also been destabilizing and are "absolutely a factor" both in the short and mid-term.
The United States economy is in a resurgence and falling oil prices have had a positive impact on its economy. Energy independence has made a real difference, Casaletto said, as are lower import prices for the U.S., which is increasing consumption. That's a good thing, he said, because the U.S. consumes more than anyone else in the world.
China's growth projections have been lower than expected, which isn't good for Canada because it affects our mining sector. Watching China closely and seeing how it is in turn affected by the U.S. resurgence is important, he said.
Why have oil prices dropped? It comes down to less demand, a supply glut and Saudi Arabia refusing to cut production. However, the price will come back to $60 and eventually in 2016 it will level out at $80-$90.
Some of the top barriers to Canadian competitiveness include silos in skills development and a lack of clarity regarding the duty to consult with Aboriginal peoples. Canadian trade is also constrained my infrastructure deficiencies and the tourism sector is not competitive.
The innovation rate is also not sufficient to help manufacturing rebound, Casaletto said.
Canada is also missing out on foreign trade opportunities.
Moving to a provincial level, Newfoundland has a tough short-term outlook, given the decline in oil prices. However, the province may be able to become and energy provider with new hydroelectric projects such as Muskrat Falls.
Nova Scotia has a real opportunity in manufacturing as federal shipbuilding ramps up, but "it comes down to confidence," Casaletto said.
New Brunswick depends on exporting to the U.S. and things have not gone well because of that, but with the resurgence of the U.S. economy their future may be brighter.
Quebec and Ontario have actually benefited from low oil prices and the manufacturing sectors will also benefit from these conditions.
Manitoba also exports to the U.S. and has the lowest electricity prices on the continent. Saskatchewan has a "significant oil dependency," but potash and mining will help.
Alberta has been deeply affected by oil prices, with housing starts halved and retail as well as consumer confidence way down.
"Alberta just has to weather this storm," Casaletto said, added the key to success is diversification.
The province with the most reason to smile is British Columbia, where there is a diversified economy. Confidence is high. People are staying in province and it is also the only province with a balanced budget, which is encouraging from a construction standpoint.
There is still much activity in the commodity sector, and "as fast as projects come offstream, others come onstream," Casaletto said.
In terms of infrastructure, the long-term outlook is that with a built up resource sector there will be a demand and commitment for infrastructure.
The government is investing less in buildings, with a shift going to civil infrastructure work and mining.
What happens in 2016 is what will affect public budgets and their ability to commit to infrastructure, Casaletto said. The long-term commitment is there, but the short term is what will affect plans going forward.
Residential construction is rising, but will become less of a factor as time goes on compared to non-residential construction.
"Residential is not what's driving the outlook," he said.
The service sector is strong and has been for a long time, which means more office buildings and less vacancies. There is also pent-up demand for hotel infrastructure in Canada and there is a lot of contemplated work in the pipeline.
Retail projects keep coming online and the "fundamentals are there in the commercial sector for it to be a leading sector across the country," Casaletto said.
The real question is how these disparate factors come into play in 2016, he said, which will affect the economy long-term.
Sparks began her presentation by saying the trajectory of investment in construction is upward in all sectors. But "the word of the day is 'moderate'," she said.
There is a perception that with declining oil prices everything is going down and that is not the case, she said.
Institutional growth will be slower in the short term, but is in a growth mode up to 2024, Sparks said.
Construction and maintenance investment in the western region is still taking place despite the decline in oil. There is movement in Liquefied Natural Gas (LNG) and mining in B.C., and it is in a strong position though things may peak by 2018. Alberta has new capital projects and there is sustaining capital activity, which has to be maintained.
Saskatchewan is still growing strongly, and the West is still the strongest growth engine.
Ontario has transportation and northern development, but infrastructure development is key to sustained growth. Quebec is experiencing moderate growth, with pipelines, mining and energy generation as key areas.