According to a report from BMO Capital Markets, residential and non-residential construction accounts for 13.4% of Canadian GDP and is well beyond the 30 year average of 10.4%.
The U.S. reliance on construction is only 5.8% of GDP and at the top of their housing bubble in 2006 was only 9.4%.
The reliance on this volatile cyclical sector shows up in the employment data where 9.7% of Canadian workers are employed.
“Any time you get to extremes on almost any measure of the economy, you have to start asking serious questions,” said Doug Porter, chief economist at BMO Capital Markets “Has something fundamental changed to justify this, or is it an accident waiting to happen?”
A period of exceptionally low interest rates “juices” construction more than other sectors, Mr. Porter said. And interest rates can change in rapid and unpredictable ways.
BMO’s report says construction’s outsized share of the Canadian economy is an example of how Canada’s unbalanced monetary policy–low rates, high currency–is affecting the economy.
Read the whole Wall Street Journal September 19, 2013 article by Don Curren on a BMO Capital Markets report: "Construction Might Loom a Little Too Large in Canada’s Economy"