Canada’s Building Investment Growth Is Gone After Adjusting For Inflation

Canada’s economy is leaning on real estate once again. Statistics Canada (Stat Can) data shows building construction investment hit $19.1 billion in January. Investment is 3.4% higher than a month before, and 12.0% higher than it was last year. There’s a bit of a catch though — the growth disappears once adjusted for inflation. It actually sees a contraction in some areas.

Canadian Building Investment Is Lower After Inflation

Adjusting the investment for inflation reveals less activity than a year before. January’s real building investment is up 4.0%, but down 9.7% from the same month a year before. High soaring inflation means a lot more money isn’t going as far. This helps obfuscate less activity.

Canadian Building Construction Investment

The seasonally adjusted monthly total of residential and non-residential building construction in Canadian dollars.

Source: Statistics Canada; Better Dwelling.

Home Building Saw The Largest Contraction Due To Inflation

As usual, most of the building investment is for residential real estate. Investment hit $14.1 billion in January, up 4.1% from the month before. The segment is about 12.3% higher than the same month a year before, showing substantial gains. Four consecutive month increases show there’s definitely demand. It’s just not clear if it’s more demand, or existing demand paying more.

Canadian Residential Building Construction Investment

The seasonally adjusted monthly total of residential building construction in Canadian dollars.

Source: Statistics Canada; Better Dwelling.

Once again, the increase in residential building investment is primarily due to inflation. Once inflation-adjusted monthly growth is 4.9%, but annual growth plummets 12.9% lower. The market has seen strength over the past few months, but inflation is eroding capital fast. 

Commercial Building Investment Only Saw A Minor Real Adjustment

Non-residential, aka commercial, building has held up after being largely ignored last year. Commercial building investment reached $2.8 billion in January, up 1.5% from a month before. The value was 11.2% higher than the same month last year, a big climb.

In real terms, the value is 1.8% higher than a month before and 1.6% lower than last year. Unlike residential inflation, it doesn’t reveal a double-digit decline once adjusted. Though there is a lot of growth trimmed off.

Canadian building investment is very high, especially in contrast to pre-2020 dollars. A lot of that investment is being eroded by high inflation, obfuscating the fall in demand.