Canadian building permits fell for a fourth straight month in February, as concerns over the floundering United States economy cut into business spending and expansion plans in Ontario.

A weak performance in the City of Toronto dragged Ontario-wide permits down 16 per cent to $2 billion, the lowest since April 2007.

"Uncertainty related to the impact of a weakening U.S. economy and the high dollar could have a negative impact on non-residential construction intentions," Statistics Canada said yesterday.

Ontario, which does the bulk of its trade with the U.S., has been the hardest hit by the slowdown, which has resulted in layoffs at car plants and other manufacturers.

Market expectations had been for a 1.3 per cent increase for permits nationally in February over January. Instead, building permits dropped 1 per cent to $5.76 billion.

Permits, however, would have risen 9.8 per cent Canada-wide if hard-hit Ontario's figures had been excluded, Statistics Canada said.

Permits are considered a leading indicator of future economic conditions, giving a look at the construction intentions of developers and the expansion plans of businesses.

"The drop in February permits is discouraging," Royal Bank of Canada assistant chief economist Paul Ferley said in an economic note yesterday.

"The disappointing performance (of non-residential permits) so far this year raises the risk that the recent credit tightening, along with increased discussion of a possible U.S. recession, is weighing on business spending."

The bank said in a report last week that Ontario is "teetering" on the brink of a recession.

Yesterday, Conservative Opposition Leader Bob Runciman pushed for tax relief to boost the province's economy.

Last week alone, Runciman said, 124 workers lost their jobs or were laid off at Gencor Foods in Kitchener, 42 at a Kraft Foods Canada plant in Northumberland and 27 at Weetabix Ltd. in Cobourg.

Although some businesses are suffering, however, residential builders remain upbeat.

Residential permits were up 21 per cent in Ontario, offsetting decreases in non-residential building, which includes commercial, industrial and institutional construction.

In Toronto, building permits were down 31 per cent overall, due to a plunge in non-residential building. But residential permits, which include single-detached and highrise projects, were up 28 per cent, suggesting home builders are confident in the market.

"Several factors could have a positive impact on the demand for housing, including steadiness in employment, growth in disposable income, strong immigration, as well as low interest rates," Statistics Canada said.

The Royal Bank now expects the Bank of Canada to continue to cut interest rates, sending the key overnight rate down to 2.75 per cent from 3.5 per cent by mid-year. That should give the housing market a boost in the form of lower mortgage rates.

If the U.S. economy does slide into recession, however, job losses in Ontario are likely, which would mean fewer home buyers, no matter what the price.

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