The Conference Board of Canada’s Senior Economist Robyn Gibbard offers the following insights on today’s release of data on investment intentions:
Despite many headwinds, today’s Statistics Canada release suggests that investment will actually grow faster this year than last. If these figures hold up, the two main takeaways are that investment in Canada will finally reach and exceed its 2014 peak, and that the mining sector will drop out of first place in the investment figures for the first time in decades.
- Capital spending expected to rise faster in 2020 than in 2019, as we expected in our latest Canadian Outlook Economic Forecast. With this growth, capital investment will finally reach and surpass its 2014 peak.
- The largest contributor to growth is the transportation and warehousing sector, responsible for half the overall projected increase for 2020.
- Other major sources of anticipated growth include utilities and health care. The largest decline will be in agriculture, forestry, fishing and hunting, where investment is set to fall by more than 10 per cent.
- We will also see a decline of 1.4 per cent in investment in mining, quarrying, and oil and gas extraction, bringing the sector to a new low. However, the decline in that sector is much smaller than the ones we have seen in the past few years. Having already declined so much, there is little room for firms to cut spending further.
- If these projections play out, 2020 will represent a milestone: for the first time in decades, an industry other than mining, quarrying, and oil and gas extraction will hold the top spot in the investment figures. The new biggest investor will be the transportation and warehousing sector.
- Geographically, we see big projected investment growth in Ontario, Quebec, and British Columbia. The biggest declines are in Nunavut, Newfoundland and Labrador, and Manitoba.
- Besides these big winners and losers, investment in the remaining provinces will be up or down only slightly compared to last year. Overall, 7 of the 13 provinces and territories will see investment growth, while the remaining 5 will see declines.
- Looking at the type of projected investment, we expect to see an increase of 4.5 per cent in non-residential construction but a decline of 0.2 per cent in machinery and equipment spending.
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