FMI: COVID-19 Canadian construction recession will have a long road to recovery

FMI cover

Ontario Construction News

The Canadian construction economy is heading into a recession that will see significant declines through next year, especially in the residential, power, religious and educational segments, says Raleigh, NC-based consultant and investment banker FMI Corporation.

The consultants say in the FMI Engineering and Construction Outlook Second Quarter 2020 Report that the total “put in place” construction across Canada will decline 8 per cent this year and a further six per per cent in 2021. Total volumes in 2019 were $284,761 million; but the numbers this year are forecast to decline to $262,192 million and for 2021 to be $245,416 million.

“This current outlook incorporates a better understanding of the long-term impacts of COVID-19 and the resulting recession,” writes Paul Giovannoni, FMI’s managing director, building products.

“Though we forecast overall construction demand to be down over the next several years, an economic downturn is an opportunity for disruption and innovation, particularly for the building products industry. This can be done through product differentiation, customer loyalty or niche segment focus.”

In a video, Jay Bowman, FMI’s managing director, research and analytics, says that traditional industries including pubic sector construction that normally do well in recessions will likely suffer this in the next couple of years because of the sharp decline in tax revenue collected by state and local authorities in the US. In the US, the overall percentage decline next year is predicted to be slightly greater than Canada’s at 9 per cent.

Bowman noted the construction industry lags behind the overall economy and so the industry won’t feel the full effects of the COVID-19 recession until next year.

FMI says in Canada that the 2020 segment performance will be stable with growth between zero and four per cent in health care, educational, transportation communication, highway and street, sewage and waste disposal, water supply and conservation and development.

The news is much less positive for other sectors including single family, multifamily, residential improvements (additions, alterations and major replacement), lodging, office, commercial, religious, public safety, amusement and recreation, manufacturing and power. FMI sees no sectors in Canada likely to improve (with growth of five per cent or more) this year.

As well, things will only grow slowly in the 2022, 2023, and 2024 fiscal years – with the overall predicted Construction Put in Place for 2024 at $268,595 million still significantly lower than it was in 2019, FMI says.


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