B.C. saw a surge in building permits in April, with building permit values jumping 81.1 percent to a seasonally adjusted $3.1 billion, surpassing the all-time high set in June last year — meaning the province's future construction industry will restart quickly in the coming months, according to BIV reports.
This month's significant increase led to a rise in building permits nationwide, driven by growth in the non-residential and residential sectors, with construction intentions rising by 60.2 percent and 150 percent, respectively. Year-to-date permits are 25.9% higher than the same period in 2023.
The 12-month average for building permits in B.C. has been depressed since late 2022. This month, it recorded its biggest increase since May 2022.
The Bank of Canada cut its benchmark interest rate to 4.75% from 5% on June 5, the first rate cut in four years. Once the rate cut cycle opens, multiple future rate cuts will provide more support for the construction industry. However, Canada will need multiple rate cuts to see a significant and sustained uptick in construction intent.
B.C.'s residential building permit value increased to $2.1 billion, the highest monthly permit value in the sector to date. Multi-family permits increased by 75.2 per cent, with 7,200 permits issued for new multi-unit building projects in areas including Surrey and Coquitlam. Single-family home permits also increased, albeit less dramatically – permits issued in this subcategory rose 1.1 percent, down from the 8 percent increase in March.
The non-residential permit value rose to $1 billion in April, with all sub-categories seeing an increase in the value of the permit. Following a significant decline in March, the value of industrial and commercial permits more than tripled from March to April, while government licence issuance rose by 24%.
Nearly all BC provinces issued more permits in April. Vancouver has more than doubled its licensing volume on both a monthly and year-to-year basis.
In Chilliwack, licensing volumes increased by almost 50 per cent and Victoria's permits increased by 22 per cent month-on-month. Kelowna and Nanaimo also saw an increase in licensing value, rising by 12% and 14.7% respectively. In contrast, permits for Kamloops and Abbotsford-Mission fell by 0.6% and 45.3%, respectively.
Of course, building permits provide an early indicator of building activity in Canada, and the issuance of permits does not guarantee that construction is about to begin.
Sales in all segments increased slightly sequentially
In April, B.C.'s manufacturing sales rose 2.8% to $5.3 billion, reversing March's downward trend. Non-durable consumer goods sales jumped 5.1% month-on-month, while consumer durables sales rose 0.8%. On an annualized basis, B.C.'s manufacturing sales were 2% lower than in April last year. On a year-to-date basis, sales were down 4.3%.
In B.C., the results were mixed across categories in Consumer Durables, with a significant increase in sales from the manufacture of transportation equipment (up 13.2 percent) and sales from the manufacture of furniture and related products up 13.6 percent. After declining in March, sales of wood products manufacturing edged up 0.8%. Base metal manufacturing sales declined the most at 8.7%. On an annual basis, sales of consumer durables fell by 3.5 percent, while manufacturing sales of the non-consumer durables sector fell by 0.2 percent.
In Metro Vancouver, manufacturing sales rose 8.2% in April, with consumer durables sales up 9.5% and non-durables up 7%.
Positive economic growth will be achieved next year
However, according to the RBC report, Canada's policy rate remains at 4.75%, well above the central bank's estimate of a range of 2.25% to 3.25% – a range that would have a neutral impact on the economy (neither contributing to acceleration nor deceleration). The RBC report said that even if the Bank of Canada will cut rates by another 75 basis points this year, the level of interest rates will remain above the neutral level.
Looking ahead, RBC believes that Canada's economy and GDP per capita are likely to continue to weaken in the near term, returning to positive growth in 2025, largely due to consumer spending coming up next year as interest rate headwinds ease. Business investment is likely to fall for the second year in a row this year.
At the provincial level, B.C.'s economic growth this year will exceed expectations for 2023 – up 1.6% from a year ago. But that momentum is fading. A sharp decline in the willingness to spend capital will be a major drag on economic growth this year.
At the same time, lower interest rates will bring some relief to households and businesses, but it will do little to ease the pervasive affordability tensions in the province. The RBC report expects B.C.'s economic growth to be around 0.7% in 2024, but will remain low nationally.