Last year saw the construction industry’s strongest year since 2013 but the year ahead will be softer.

That’s the forecast from the Conference Board of Canada which says the non-residential sector will see a modest turnaround but the residential sector will contract slightly.

"Spending on new housing and renovations will likely slow this year as Canadians become more cautious under new mortgage rules and interest rate increases. This will put downward pressure on new residential construction," said Michael Burt, Director, Industrial Economic Trends, The Conference Board of Canada.

Housing starts are forecast to drop by 2.9% in 2018, led in large part by a 4.3% drop in Toronto and a 6.5% drop in Vancouver in 2018.

Spending on new homes is expected to fall from 5.8% in 2017 to 3.4% in 2018 and then fall 3% in 2019.

That will see the residential construction sector contract by 0.3% in 2018 following a 4.9% gain in GDP last year. 

One positive note is that Canada's backlog of unsold new homes is falling which should encourage building activity in the long run, propelled further by strong population growth in some regions and strengthening labour markets around the country.

Canada's non-residential construction industry is forecast to grow by 1.9% cent in 2018.

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