Canada building permits decline in June against market consensus for a rise

Building permits in Canada declined during the month of June, against the market expectations for a rise, led by weaker construction plans for multi-family dwellings and institutional buildings.

The total value of building permits issued by Canadian municipalities in June fell 5.5 percent to CAD6.41 billion (USD4.87 billion), data released by Statistics Canada showed Monday. However, expectations were for a 1.5 percent increase, according to economists at the Royal Bank of Canada.

Further, the data agency said that residential permits declined 5.0 percent to CAD4.11 billion in June, led by a 15.8 percent drop in multi-family dwellings. Construction intentions for single-family homes rose 4.2 percent in June. Also, non-residential permits fell 6.2 percent in the month to CAD2.30 billion.

In addition, there was a decline in six provinces with Ontario and British Columbia showing the biggest decline. Of the 34 metropolitan areas, the sharpest decline was seen in Vancouver, primarily reflecting a decline in multi-family dwellings. The decline in Vancouver will tend to increase concerns surrounding the risk of rising property prices even though single-household permits held firm, reports said.

On a year-on-year basis, permits issued fell 12.9 percent. Building-permit data tend to be volatile on a month-over-month basis. Building permits typically provide an indication of the housing activity in Canada and is based on sample respondents of 2,400 municipalities.

Meanwhile, the construction sector accounts for roughly 7 percent of total employment in Canada, while housing-related spending accounts for roughly one-sixth of total economic output. Moreover, weakness in the industrial sector is likely to cause particular unease within the Bank of Canada with reduced potential for economic rebalancing away from the energy sector.