CLR Connector Declining Labour, Inflation, And Rising Interest Rates Leading to Slow Growth in The Construction Industry
Inflation and the shortage of workers continue to preoccupy construction businesses, according to a Statistics Canada survey measuring business conditions and expectations for the third quarter of 2022.
Data for the Canadian Survey on Business Conditions was collected from July 4 to August 8, 2022.
While one-third of businesses reported the recruitment of skilled workers as an obstacle to growth, 51% of respondents from the construction sector specifically said they do not have access to the labour they need.
In 2012, the B.C. construction labour force was approximately 195,000 while investment in construction was close to $20B. In 2022 that investment was nearly doubled and yet the labour force, according to a recent BuildForce labour report, was not much higher at 197,400. BuildForce estimates that by 2027 we will be short ~5,600 workers in the province, taking into account retirements and new entrants into our market. With such construction activity going on, we are likely to face a labour challenge unseen before.
The rising costs of inputs were also cited as a challenge to growth, with 72% of respondents from the construction industry saying they expect inflation to put further pressure on contractors.
GDP marks slow growth for construction
The non-residential sector posted a contraction of one per cent during the second quarter. This decline coincides with the economic slowdown following aggressive interest rate hikes instituted by the Bank of Canada to control inflation.
Industries that require large sums of capital invested over long periods, including the financial, insurance, real estate, and construction sectors, are more sensitive to interest rate changes. It is not surprising that these industries saw the largest output declines during Q2 2022, and with the most recent hike on September 7, it’s expected that construction may slow down even further.