Investment Recovery Fraught With Risks: Canada’s Two-Year Business Investment Outlook

The Conference Board of Canada, 14 pages, October 20, 2020
Issue Briefing
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This quarterly economic forecast presents the medium-term outlook for the Canadian economy. This release focuses on business investment. For an overview of all major components of the economy, go to the Canadian Outlook main page.

Document Highlights

  • Investment spending will drop 8.0 per cent this year for non-residential structures, and an even steeper drop of 17.0 per cent is anticipated in the equipment sector.
  • Business confidence hit record lows in the second quarter. Confidence improved in the third quarter but remained low by historical standards, and the weakness in confidence is a key factor behind our pessimistic outlook for investment spending this year.
  • A recovery in confidence and higher capacity utilization will lead to a rebound in investment activity in 2021. However, the outlook remains fraught with downside risks and depends heavily on the future course of the virus and the development and production of an effective vaccine.
  • Canada’s competitiveness compared with the U.S. remains a sore spot. This has been especially true since 2017 when the Trump administration slashed U.S. corporate tax rates. However, the prospect of higher taxes under a Biden administration could start to level the playing field between the two countries.
  • Investment in the oil and gas sector, as well as in manufacturing, has been hit the hardest by the pandemic. Conversely, activity in electric power generation and pipelines has been relatively unscathed.

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