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Fred Lum/Fred Lum/The Globe and Mail

January is not typically a kind month to the home renovation sector. It's too cold. Plus, post-holiday bills pour in.

Not this year. January promises to be a blockbuster month for home renovations as people race to finish projects before the federal government's home renovation tax credit expires at the end of the month.

It's proven a boon to companies like Acrylon Plastics, a Winnipeg-based maker of window frames. Chief executive officer Craig McIntosh said Tuesday business has boomed 30 per cent since last October in an ordinarily slow month. He has been able to keep 30 workers employed who normally would have seen temporary layoffs.

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Mr. McIntosh is worried though, that the recovery isn't yet sturdy enough to sustain demand once that credit runs out this month.

It's a key concern not lost on top policy makers. The Bank of Canada said Tuesday the recovery continues to depend on "exceptional" and "extraordinary" measures by governments and central banks.

Sustained global economic growth hinges on the delicate timing of when life support of low interest rates and stimulus spending is removed.

Mr. McIntosh frets about the former as the government's tax credit expiry looms. "My concern is that there's no momentum behind this recovery - we'll return to where we were a year ago where demand drops off and people throughout the industry get laid off."

He and others in the industry would like the credit extended by six months, to give time for new home construction to gain traction and the labour market to recuperate.

It may be false hope. Finance Minister Jim Flaherty said this week the measure was not "inexpensive" and the government's plan is to let it expire.

The program lets Canadians get up to $1,350 in tax relief for projects worth between $1,000 and $10,000 that take place by Feb. 1. It's proven popular, those in the industry say. Canada Revenue Agency figures at least 3.5 million Canadians have enquired about the program on the web or by phone since it started.

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The program has spurred spending, economists say. Renovation spending outpaced new home construction spending in the third quarter, accounting for a greater-than-average 41 per cent of total residential spending, says John Clinkard, Deutsche Bank AG's chief economist on Canada.

He believes the credit has been a big driver of spending in the second half of last year and into this month, especially given that rock-bottom borrowing costs are making renovations easier to finance.

"Clearly once it expires, you're going to see a pause in activity" for a few months, he says. But other factors may mitigate that: "Given the strong growth of home sales ... that's going to support renovation spending because when people buy a home, they're probably going to make some changes."

Retail figures suggest the measure is boosting spending. Sales at home centres and hardware stores rose 1.4 per cent in October from a year earlier even as total retail sales slipped 0.2 per cent, according to Statistics Canada.

Canadian spending on home renovations accounts for about 2.6 per cent of economic activity, or $33.8-billion in 2008.

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More

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