The holiday season has begun, so naturally, you’d expect that construction would slow down. While that was definitely the case in the U.S. last year, north of the border Canadian construction was going strong. As the weather in Canada and parts of the U.S. turns frightful, everyone gets festive and takes time off. So why did Canada have such a good construction season last December, while the U.S. was stagnating?
Let’s take a quick look back at the key differences between the two countries and the contributing factors as to why construction thrived in Canada last Christmas.
December 2018 Building Trends in Canada
December has traditionally been a wild card for builders in Canada; however, in 2018, it was up 0.2% from the previous month to $13.7 billion. The biggest gains came from within the residential sector (up 0.6%), which actually offset a decline in non-residential development during the same period.
Surprisingly, the coldest places in Canada experienced some of the biggest month-over-month increases, including:
- Newfoundland +18%
- Northwest Territories +15%
- New Brunswick +15%
The Arctic and Atlantic regions are not known for mild winters.
Year-over-year, the residential development of semi-detached homes and apartments increased most during the month of December in Canada.
December 2018 Trends in the United States
The U.S. is home to one of the largest construction industries in the world, with over $900 billion dollars spent on private construction in 2018 alone. Despite the 4.1% increase in the market overall, it was still the weakest year on record since the start of the decade.
December didn’t help, falling 0.6% month-over-month from November.
New home construction saw a significant decline of 11% in December 2018, which was a two year low; however, multi-dwelling units saw the biggest dip in investment.
Why Was Construction Up in Canada, But Not South of the Border?
There are a few factors compounding together that could explain why December construction was up in Canada but not in the U.S. last year. The most obvious is the weather.
Building season in Canada is highly weather dependent, so milder temperatures typically means more projects push forward. In December 2018, many parts of Canada saw higher than average daily temperatures.
In Toronto, the average for the month was 0 degrees celsius, with some days reaching as high as 12 degrees. As Toronto-based builder Evan Nolan of Jezer Build Construction explains, “Last December, Toronto was unseasonably warm, which meant we could keep going for most of the month.”
Since a lot of residential development in Canada is concentrated within the Greater Toronto Area (GTA), the weather there can influence market outcomes. That said, some of the coldest places in Canada saw major gains in building activity during December also.
Aside from physical barriers to building like weather, the economy has a lot to do with new housing development and residential renovation. If the economy is down, Canadians are less likely to spend on home improvement or to invest in new homes and this effect trickles throughout the market.
2018 brought a steady Canadian economy with unemployment at a 40 year low, continued wage growth and increased consumer spending. That likely helped with the 0.2% increase in construction investment last December.
Meanwhile, in the U.S., the 0.6% decline in construction investment may have been related to high mortgage rates, high housing costs, and an increased cost in building materials. The labor shortage likely didn’t help either.
Those factors combined with an overall weak U.S. economy in 2018, a late-year stock market selloff and impending government shutdown left consumers and businesses anticipating a potential recession (and likely not thinking about home purchasing or improvement).
What About Christmas Construction in 2019?
This unwanted cocktail of compounding factors in the U.S. meant bad news for builders during the Christmas season, especially compared to Canada. The combination of climate plus economy ups and downs directly impact the construction industry. As 2019 draws to a close, we should soon be able to see how those same factors influenced performance this year.
So far early season predictions called for a milder winter across Canada again, and while there was anticipation for great precipitation, it has so far been on par with last December in Toronto at 22 mm. Meanwhile, the United States entered into December about 0.5 ºF below the seasonal average.
Economically, the U.S. manufacturing sector has slumped alongside global markets and the country’s overall economy could see a recession depending on how the next couple of months play out politically. North of the border, despite trade wars and climate change, Canada is doing better than expected economically. This trend should continue throughout December and into early 2020.
With similar variables in Canada and the US this year, we predict that the outcomes of the Christmas construction season in 2019 will be similar to that of 2018. We’ll be sharing those results once they’re available, so stay tuned!
Image 1: Screenshot of December 2018 Canada Building Trends via StatsCan
Image 2: Screenshot of US Building Trends via Construct Connect
Image 3: Custom graphic via RenoRun
Image 4: Screenshot via Time and Date