Finance. Investments in Non-Residential Construction Down 6.6% in Canada

Investments in non-residential construction and machinery and equipment are expected to total $237.5 billion in 2009, down 6.6% from 2008. Private sector investment is anticipated to fall by 13.1%, mainly due to the mining and oil and gas extraction industry.

Public sector capital spending, however, is expected to increase 9.5%.

Investment intentions in the mining and oil and gas extraction sector total $44.9 billion, 26.4% less than in 2008.

Capital spending will decline primarily in Alberta and British Columbia.

Private sector investment is expected to drop 13.1% to $157.9 billion in 2009. The decrease is largely attributable to the mining and oil and gas extraction sector. If that sector had been excluded, the decline in private-sector investment would have been reduced by half.

In contrast, total public sector investment will be $79.6 billion, up 9.5% from 2008.

As a result, the public sector share of total capital spending will climb from 28.6% in 2008 to 33.5% in 2009.

The shrinking mining and oil and gas extraction sector

The declining demand and falling oil prices experienced in late 2008 resulted in the cancellation or postponement of a number of investment projects.

Capital expenditures in the conventional oil and gas extraction industry are expected to drop by 25.0% to $21.3 billion. That will be the industry's third consecutive reduction in capital spending.

In the non-conventional industry, mainly the Alberta oil sands, investment is expected to total $13.2 billion, 31.1% less than in 2008.

Investment intentions in the mining sector are down 26.4% to $5.6 billion in 2009.

Manufacturing: A widespread decrease in investment intentions

Lower capital spending is expected in 13 of the 20 industries that make up the manufacturing sector. For the sector as a whole, investments of $18.4 billion are planned, which represents an 8.5% decline.

Investment decisions were affected by the slowdown in the global economy in the second half of 2008 and its impact on overall demand.

The largest cuts in spending intentions are in the wood products (-28.8%), petroleum and coal products (-28.0%) and transportation equipment (-7.7%) manufacturing industries.

Capital spending will decline primarily in Alberta and British Columbia

Investment intentions for 2009 are down in Alberta, as a number of projects in the oil and gas extraction industry were suspended. The expected value of private and public investment is $62.5 billion, a 15.3% decrease from 2008.

In British Columbia, investment intentions total $27.9 billion, down 9.8%. The decline is partly due to lower spending in the oil and gas extraction sector and transportation and warehousing industries.

Capital expenditures will also fall substantially in Northwest Territories and Nunavut, as a result of the slowdown in the mining industries.

Investments in Ontario will decrease slightly (-1.6%), as higher spending by public administrations will offset the spending reductions in manufacturing and the mining industries.

In Quebec, increased investment by public administrations will make up for lower spending in the mining industries, leaving total investment virtually unchanged (-0.4%).

Higher capital spending by the public sector

Public administrations plan to invest $39.7 billion, up 10.5%, following a 22.3% increase in 2008.

The federal government's contribution will be 12.6%, compared with 37.6% from the provincial and territorial governments, and 49.8% from regional, municipal and local governments.

The growth in capital spending is largely attributable to local governments, whose capital expenditures are expected to total $19.8 billion in 2009, 13.2% more than the previous year. Both the federal (+6.3%) and the provincial and territorial (+8.5%) governments will also boost their spending.

The increase in capital expenditures by the public sector is also evident in the utilities industry and the transit and ground passenger transportation industry. More than two-thirds of the investment in those industries comes from the public sector.

Source: Statistics Canada, Febr. 25, 2009

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