By Jock Finlayson, ICBA Chief Economist
The latest data on building permits from Statistics Canada provide a mixed picture of the health of the construction sector.
Nationally, the total monthly dollar value (in current dollars) of new permits issued inched ahead by 3.4% in August to roughly $11.9 billion (seasonally adjusted). Declines in residential permits were offset by gains in the non-residential segment. The latter can be affected when a handful of large projects are launched within a short period of time. Residential permit values typically are 50-100% greater than non-residential permits in dollar terms.
Looking at developments over the summer months (June-August) and comparing the data with the same period last year offers further insight into the construction marketplace. On a seasonally adjusted basis, Canada-wide permit values have weakened slightly, with the three-month moving average dipping 2% compared to the summer of 2022; relative to August 2022, total permit values are down by about 6%. The softness in permits has coincided with and contributed to a marked slowing of economic growth in Canada, with real GDP essentially flatlining in Q2 and remaining stagnant into Q3.
Turning to B.C., in August total permit values reached $2.18 billion, little changed from one year earlier but up 21% from the month before. This follows a steep 25% drop recorded in July. The province saw a substantial year-over-year decline in residential permits in August, while non-residential values posted a strong advance. The Statistics Canada release specifically references a single major hospital upgrade project and a new university residence under construction in Kelowna as contributing factors to the increase in B.C. non-residential permit values. Using a three-month moving average for June-August 2023, B.C. permits were 2.3% lower than last summer. Year-to-date, permits are down 11%, with the residential segment down almost 18%.
Alberta has experienced a rise in the value of residential permits issued since June, which is consistent with an increase in housing starts over the summer as well as a surging population. Total permit values in August were running 3.6% below the level in August of 2022. Non-residential permits fell by 10% between July and August. However, on a year-to-date basis they are up 7.6%.
In general, the data on construction activity – including building permits – is consistent with a Canadian economy that is growing very slowly (if at all) and feeling the effects of the rapid tightening of monetary policy that households and businesses have endured over the last 18 months. In the non-residential segment, the commencement of large projects can have a significant impact on permit values, notably in individual provinces. Nationally, the decline in residential permits since last summer provides further evidence of how the rising cost of money and the reduced availability of credit are crimping major sectors of our economy.
 Building Permit Values, Canada, millions of dollars:
| August 2023 | July 2023 | August 2022 | |
| Canada, total | 11,860 | 11,472 | 12,601 |
| Canada, residential | 6,834 | 7,095 | 8,337 |
| Canada, non-residential | 5,026 | 4,378 | 4,264 |
| B.C., total | 2,183 | 1,805 | 2,169 |
| B.C., residential | 1,139 | 1,088 | 1,605 |
| B.C., non-residential | 1,044 | 718 | 565 |
| Alberta, total | 1,280 | 1,251 | 1,329 |
| Alberta, residential | 869 | 793 | 923 |
| Alberta, non-residential | 411 | 459 | 406 |
Source: Statistics Canada, “Building Permits,” August 2023, released on October 12, 2023.
