What a boom looks like (I)

Given the propensity in some quarters to view residential construction statistics as one of the sure-firest ways of telling whether an economy is booming or not, it might be worth doing a little head-check.

The following graphs show the value ($millions) of construction permits in three classes (residential, commercial, and industrial construction), in several provinces, going back to the 1970s, with data to May 2008. The graphs show the twelve-month trailing average of the monthly figures; the averaging smooths out the seasonality that is inherent to this type of indicator. Note that the verticale scale is not common.

This is Alberta:

Saskatchewan:

Ontario:

British Columbia:
Nova Scotia:
For now, the object lesson is this: protracted periods of economic growth, as revealed in residential housing statistics, tend to coincide show growth in the value of all three classes of construction.

Similarly, economic downturns tend to reveal themselves across all three classes.

The match isn't always exact. Saskatchewan's latest boom is showing up only loosely in the industrial construction trend, and the housing stats show no meaningful trend in the early 1980s recession in Ontario. B.C.'s booming housing construction market of the early to mid 1990s was not sustained by the province's economic fundamentals, which shows in the later decline (and the epidemic of leaky condos built on the cheap.)

Overall, however, there is a good case to be made that sustained economic growth shows can be measured throughout an economy — when it's actually happening.