Housing, renovation demand drives market for building materials to record level
Strong demand for housing and home renovations has propelled the domestic market for building materials to its highest level on record.
In its monthly report on wholesale trade, Statistics Canada finds that while overall sales by Canadian wholesalers rose by 0.4 percent to $71.5 billion in April, demand for building materials and supplies grew by almost 9 percent—to $13.1 billion.
In April, sales were 26.5 percent higher than in December 2020. The demand for housing and home renovations has generated both an increase in the volume of building materials and supplies sold, and in their prices.
Exports of lumber and sawmill products rose 7.8 percent in April, largely to meet the demand of American home builders. The number of new housing starts fell in both Canada and the United States in April, however, there is usually a several month lag between the start of a new home build and the use of lumber.
As a result, sales in April reflect the fact that new home builds have been trending higher for the past several months. In April, the price of softwood lumber, which is the largest component of the building material and supplies subsector rose 10.1 percent and was 169.4 percent higher than in April 2020.
Prices up in seven provinces, but not Ontario
Wholesale sales rose in seven provinces and one territory in April, representing 45 percent of national sales.
The largest increase was in Alberta, where wholesalers reported $7.6 billion in sales, 5.3 percent more than in March. This was the second consecutive increase in wholesale sales for Alberta and the highest value on record.
Although wholesale sales were higher in April overall, the largest change was in Ontario, where sales were 1.9 percent (-$678.1 million) lower than they were in March, for a total of $35.1 billion. Lower sales in Ontario accounted for more than 90 percent of the month-over-month change for all provinces that had lower sales in April.
Ontario's decline largely reverses the province's growth in 2021 so far, as monthly sales have dropped to within $100 million of December 2020's level. Half of the decrease in Ontario was caused by lower sales in the motor vehicle and motor vehicle parts and accessories subsector, which was affected by the ongoing semiconductor shortage. Subsector sales fell 8.4 percent to $6.4 billion. A third of the decrease came from the miscellaneous subsector, which reported an 8.3 percent decrease in sales.
The largest increase in sales in Ontario was reported in the building material and supplies subsector, which reported a 5.3 percent rise in sales, with growth in all three industries.
No change in inventories
The value of wholesale inventory in April was unchanged from March at $93.4 billion. Higher inventories in four of the seven subsectors were offset by lower inventories in the other three subsectors. Inventory levels for this month were the highest on record for the second consecutive month.
The largest increase in inventories came from the building material and supplies subsector (+5.3 percent to $15.9 billion). This was the largest inventory value on record, and marked the seventh consecutive increase as there continued to be high demand for building materials. The lumber, millwork, hardware and other building supplies industry contributed half of the increase—the fourth consecutive record-breaking month for this industry.
Featured image: Residential building under construction in Ottawa. (Ron de Vries Photography)