CanWest News Service
Friday, November 23, 2007
VANCOUVER -- Inflation in construction costs will eat up about half of the growth expected in spending to build new offices, shops, schools and roads in the next two years, according to Credit Union Central B.C.
That means that while investment in non-residential construction is skyrocketing, project owners will have to spend more and build less.
"What [inflation] does," said Dave Hobden, an economist with Credit Union Central. "On the flip side of raising current spending, it also has the tendency to lower real growth, the quantity of investment. Because, at the margins, some projects don't fly if you have that kind of inflation environment."
Credit Union Central is forecasting that non-residential construction spending will hit $16.3 billion by the end of this year, an increase of 19 per cent from 2006, and reach $19.3 billion for 2008, another 19-per-cent rise.
However, Hobden added that with estimates for inflation in non-residential construction costs to run 10 per cent by the end of this year and rise another 11 per cent next year, inflation accounts for more than half of the gain for costs.
That rate of inflation makes it hard for both private sector and public sector builders to budget for their projects.
Hobden noted that governments at the provincial and federal level are running surpluses, and "can handle [inflation] without any serious harm to other types of spending."
But municipalities are struggling to keep up with the cost of replacing infrastructure, as well as building new roads, bridges and skating rinks.
© Times Colonist (Victoria) 2007
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