Boston, MA -- (SBWIRE) -- 07/28/2012 -- BMI View: Despite a downward revision to our 2012 construction industry forecast, Canada remains the most promising market in the developed world for this particular industry. Our breakdown data for the country's infrastructure and highlights that electricity investment and road and rail projects are leading this outperformance.
We have revised down our 2012 forecast for Canada's construction sector real growth to 3.1% (from a previous forecast of 3.8%) in order to take into account weaker-than-expected Q112 growth and volatile building permit issuances. Whilst we still expect robust growth, a residential sector slowdown is on the cards in H212, with many infrastructure projects to be delayed or downscaled.
Canada's closest competitor is Australia, which has seen growth driven by a similar combination of public investment in transport, natural resource extraction related infrastructure and an overheating housing market. However, our downward revision of Australia's anticipated construction industry value for 2012 to a weak 0.5% real growth target for the year, in light of a sharp slowdown in the housing sector, and downscaling of capital expenditure plans supporting natural resource extraction, raises concerns over Canada's growth trajectory. Australia's woes could become Canada's, especially if the housing market implodes and Canadian banks and public sector get hit and downscale funding to the infrastructure sector, or if commodity prices continue to weaken and negate capex plans.
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Rail And Electricity Sustain Infrastructure Growth
More of an imminent concern is signs of a slowdown in infrastructure investment. Infrastructure investment is expected to decline overall in 2012 to 3% year-on-year (y-o-y) (compared to an estimated 6.5% in 2011), as weak Q112 data and an uneven project pipeline weigh on our growth outlook. However, this slowdown will not be felt across the board, with some sectors outperforming the overall trend.
One of the strongest sectors will be railways infrastructure, where a project pipeline worth US$21bn will drive annual average industry value real growth to 5.1% between 2012 and 2016. This is comprised primarily by urban rail projects, including the CAD8.2bn Eglinton Crosstown Light Rail Transit project, the US$2.6bn Toronto Subway Spadina line expansion, the US$2.1bn Ottawa Light Rail project and the US$1.8bn Edmonton Light Rail project.
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