Construction Economic News

It’s as if they knew. The Bank of Canada just raised its key policy-setting interest rate, the ‘overnight rate’, by 25 basis points (where 100 bps = 1.00%) to 4.75%. This was in the belief that the Canadian economy is continuing to run too hot. 2023’s Q1 real (inflation-adjusted) gross domestic product growth annualized was +3.1%, an above-average result. (The annual change in Canada’s GDP over the first 22 years of this century has been +2.1%.)

Neither the U.S. nor Canadian economies have slowed enough to fully satisfy the central bankers in either country. Also, inflation rates in both nations might be half what they were at their peaks, but they are still viewed as being too rapid, and, therefore, some further interest rate hikes can’t be ruled out.

What’s not to like about May’s upbeat Employment Situation Report from the Bureau of Labor Statistics? No doubt, it depends upon one’s point of view, with the Federal Reserve probably not comfortable with the results at all, but more on that in a moment.

An expected, fallout from higher interest rates is a decline in housing starts. In both the United States and Canada, that proposition is being partly realized, but not to a full degree. The story is best told in graphs, and the bullet points below cover the highlights.

When it comes to determining the interest rate that a company must pay to borrow capital, everything is relative. The interest rate that the safest, or least risky, borrowers are charged to borrow is often called the risk-free rate.

Among the real estate firms listed on the Standard and Poor’s 500 Index, earnings per share in Q4 2022 stood at $1.21, reflecting a significant decline of 46% and 49% compared to the levels recorded one quarter and one year ago, respectively. Certainly, 2022’s rising interest rate environment was a significant headwind as the sector is highly dependent on floating interest rates which during the past year rose at their fast rate in history.

The accompanying table records the top 10 project starts in the United States for April 2023.

Clichés are often true and it is the case that a picture can be worth a thousand words.

Much Will Depend on Y/Y Comparison of Megaprojects ConstructConnect announced today that April 2023’s volume of construction starts, excluding residential work, was $47.0 billion, a decrease of -2.1% versus March 2023’s figure of $48.0 billion (originally reported as $47.6 billion).

Earlier this year ConstructConnect began publishing the Project Stress Index, a proprietary resource tracking the weekly level of projects failing to move towards expected completion.