The Economy 1998


Constructionp30-1.jpg (36603 bytes)

 

Consistent with national trends, the provincial construction industry has had to contend with the lingering effects of recession in the early nineties and public sector spending restraint. Last year represented a continuation of that trend, made worse by the decline in construction activity on the Hibernia oil project. Prospects for the industry, however, appear to be taking a turn for the better.

NON-RESIDENTIAL

Investment grew last year, however, a decline in work on the GBS project gave rise to an overall decline in construction employment, which fell from an average of 9,800 in 1996 to 8,800 in 1997. Investment gains were broadly based, led by increases in the government, communication and utility, and transportation and storage sectors.

c-01338a.gif (5668 bytes)RESIDENTIAL

The nineties have witnessed an overall decline in housing starts driven by a number of factors. These include limited employment and income growth, out-migration and changes in the composition of housing investment.

As indicated in the accompanying diagram, housing investment in the Province has remained fairly steady, averaging close to $579 million a year in aggregate terms. When viewed in the context of declining housing starts in recent years, these numbers suggest a shift in emphasis in the residential market. Aside from new construction, residential investment generally encompasses renovation expenditures, including repairs, improvements or alterations and conversions. The shift in investment is largely attributed to growth in repairs and conversions. For example, the recent surge in demand for condominiums has been met through the conversion of high-vacancy rental and other properties. This type of activity is not recorded as a start; instead, it is captured in the renovation component of investment. The proportion of investment made up of renovations has changed significantly over the past decade or so. In Canada, it has shifted from 43 to 54 percent (of the total) over the last ten years, while provincially, it has increased from 59 to 70 percent.

OUTLOOK

c-01339.gif (3865 bytes)Construction activity is expected to increase, buoyed by work related to the Terra Nova project, the continuation of work on the transshipment facility, the re-development of hospital services and more road building and repair work. The latest Statistics Canada survey of public and private investment intentions indicates Newfoundland will lead all provinces in 1998 with nearly 12 percent growth in capital investment. Gains are expected to be widespread, led by strong growth in the resource sectors.

Housing investment will continue to be buoyed by growth in renovation activity and housing starts should remain near last year's level. For a detailed list of potential and ongoing capital projects in the Province, readers are referred to the inventory of major capital projects at the end of this report.

 


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