More ominous news about the fate of the Canadian economy this year arrived Monday morning in the form of Statistics Canada’s latest survey on the spending intentions of businesses.
The federal statistics agency says capital spending this year on commercial construction, machinery and equipment is expected to drop 4.9 per cent to $251.8 billion compared to last year.
If the survey holds, it would mark the first decline in capital spending by Canada’s private sector since 2009.
Public sector capital spending is expected to decrease 0.2 per cent while the private sector is expected to drop seven per cent. The news comes amid speculation that Canada is headed for recession.
“While the survey data released today show what businesses are planning to spend, it is typically a very good indication of what actual investment in Canada will be,” Dina Ignjatovic, an economist at TD Bank, said.
Energy slump
As expected, the country’s oil-producing sector is slashing spending budgets amid the downturn in crude prices.
Spending by the mining, quarrying, and oil and gas extraction sector is expected to fall a sizable 18.7 per cent this year, according to the federal agency’s survey, to $67.9 billion.
Capital spending by organizations in the health care and social assistance sector is expected to go down 14.2 per cent from 2014 to $8.7 billion this year, while the professional, scientific and technical services sector is expected to slip 23.2 per cent to $2.0 billion.
MORE: Canada’s economy shrinks again in April amid oil shock
Oil’s contribution to the overall economy has fallen sharply in recent months, evidenced again in April:
Plus side
The transportation and warehousing sector is expected to show the largest growth this year. The sector is expected to increase spending $3.1 billion to $26.4 billion, largely as a result of pipeline transportation, and transit and ground passenger transportation.
Manufacturers plan to increase spending by 2.7 per cent to $17.5 billion this year.
That rise isn’t overly inspiring, said CIBC chief economist Avery Shenfeld, “representing tepid real growth for a sector that is supposed to be helped by the weaker loonie,” he said.
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