Capital investment plateaus
Investment forecasts for 2018 are effectively unchanged from 2017. A 2% expected drop in investment in mining and the oil patch is the main reason for the slight decline. Total investment in new construction, intellectual property, and machinery/equipment is expected to drop 2.4% from the 2017 estimate. An increase of 0.5% among private sector investors is expected to be more than offset by a 10.2% decline in public sector investment.
Source: Sask Trends Monitor by Douglas H. Elliott, January 2018.
Is the housing market less vulnerable?
The first quarter of 2018 showed an overall improvement in the vulnerability of the Saskatoon Census Metropolitan Area (CMA) housing market.
Vulnerability is defined as the intensity of signals of market imbalances (how far market indicators are from their historical averages) and the persistence of the imbalance over time. The Saskatoon CMA market is now at moderate vulnerability, an improvement from the previous assessment, in October 2017.
Overbuilding showed persistent high vulnerability caused by a combination of increased new housing inventory and a high rental vacancy rate. The overbuilding is occurring in the multi-unit sector – the volume of single-family home construction is below the historical average.
Overvaluation, on the other hand, decreased from moderate to low as a result of declining prices and continued economic and demographic growth, thus settling the imbalance of the market.
Overheating (housing demand outpacing supply) and acceleration in the growth of house prices showed low evidence of increasing and remained in the low vulnerability zone.
Source: Canada Mortgage and Housing Corporation, Housing Market Assessment, First Quarter 2018.
Mining commodities at a glance
Saskatchewan mineral production still accounts for the same share of Canada’s overall production value (13%) as it did a decade ago, ranking fourth among the provinces.
Year over year, Saskatchewan had the largest drop in production value as a result of low uranium and potash prices. In 2016, total production value dropped approximately
$3 billion from the previous year (to $5.5 billion from $8.5 billion).
Here is a snapshot of the production and value of Saskatchewan’s main mining commodities over the past few years. While the value for gold showed a slight increase from 2014 to 2016, uranium and potash values declined, with uranium having the most drastic dip.
Source: The Mining Association of Canada, Facts and Figures of the Canadian Mining Industry, 2009–2017.
First published in the June 2018 edition of The Business Advisor.