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Canada August Building Permits Fall 9.2% for Largest Decline Since Feb. 09

Canadian building permits fell more than four times as much as expected in August, as companies and governments planned fewer new structures.

The total value of permits issues by municipalities decreased 9.2 percent to C$5.75 billion ($5.69 billion), Statistics Canada said today in Ottawa. The decline was the largest since February 2009, and exceeded the most pessimistic forecast in a Bloomberg News survey of 11 economists, which had a median forecast of a 2 percent drop.

Building permits are likely to decline further as the housing market cools and governments end stimulus spending put in place during the recession to spur growth, said Robert Kavcic, an economist with BMO Capital Markets in Toronto.

“We know that over the next year or so, there’s going to be a slowdown coming” for permits, said Kavcic. Housing starts will slow to a pace between 170,000 and 175,000 units a year, from the current 180,000 to 190,000 units pace, he said.

The Canadian dollar declined from a five-month high versus its U.S. counterpart after the report. The currency traded at C$1.0156 per U.S. dollar at 10:43 a.m. in Toronto, compared with C$1.0111 yesterday. One Canadian dollar buys 98.47 U.S. cents.

Non-residential Decline

Permits for non-residential construction tumbled 23 percent in August to C$2.2 billion. The value of permits for institutional buildings dropped 39 percent, as Ontario cut intentions for hospitals and Quebec planned fewer schools, the report said. Industrial buildings fell 12 percent, the third straight monthly decline, led by factories in Ontario and utilities in Alberta. Permits for commercial buildings also declined 12 percent, as firms planned fewer hotels, office buildings and laboratories.

Residential permits increased 2 percent to C$3.54 billion, a 15 percent increase from the year-ago month, Statistics Canada said. Permits for multiple-unit dwellings surged 13 percent in August, while single-family home permits dropped 4.9 percent, the report said.

Kavcic said the residential permits numbers support his prediction that housing starts slowed to a pace of 180,000 units in September from 183,300 in August. The September figure will be released tomorrow at 8:15 a.m. New York time by the Canada Mortgage and Housing Corporation.

The total value of building permits was 11 percent higher than the year-ago month, the report said.

Statistics Canada also revised its estimate for July’s decline to 3.8 percent from the originally reported 3.3 percent drop.

To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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