Economists love trying to peer into the future. Sadly most indicators are lagging indicators, describing activity in the past. One of the few good leading indicators—building permits—allows a peek into the future for at least one industry: construction.
The total value of building permits issued by Alberta municipalities tumbled in April to $1.47 billion, a drop of 12.5 per cent from March. However, the $1.68 billion reached in March was a record high, so some pull-back was expected.
Residential permits slipped by about $70 million dollars but remain close to the high-water marks set in recent months. The moderation in permits since last April is consistent with other residential indicators such as new home prices and housing starts. All three are suggesting the housing market will remain in a healthy balance in the coming months.
Non-residential permits saw a sharper pull-back in April, but these kinds of building permits are typically more volatile than their housing counterparts. By far the most significant contributor to the drop in April was government and institutional projects, which fell from $514 million to $69 million. Commercial and industrial building permits still posted increases.
The drop in building permits in April should not be interpreted negatively. One month does not make a trend—and indeed, over the last twelve months, Alberta’s total building permits are still higher by 16.8 per cent over the comparable period a year earlier. Peering into the future for Alberta’s construction sector, the view still seems bright.*
*Courtesy of Todd Hirsch, Chief Economist, ATB Financial