In Another Hit to Economy, Canadian Firms Cool Plans for Investment in 2013

By Beltrame, Julian | The Canadian Press, February 27, 2013 | Go to article overview

In Another Hit to Economy, Canadian Firms Cool Plans for Investment in 2013


Beltrame, Julian, The Canadian Press


Business signals cautious approach on spending

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OTTAWA - Canada's corporations appear to be taking a wait-and-see approach to capital investments this year, a position that could dampen already modest expectations for economic growth in 2013.

The annual survey of private and public investment intentions by Statistics Canada indicates such spending will rise a mere 1.7 per cent to $398.2 billion this year -- the slowest non-recession pace since 1995 and well down from 7.2 per cent last year.

Private sector spending intentions was even softer at 0.8 per cent, while government investment is expected to rise by five per cent, about the average over the last two decades.

With consumers tapped out, governments restraining overall spending and the housing market cooling, the Bank of Canada has pinned its projection for two per cent growth this year on both a rebound in exports and on business investment.

But the turnaround for exporters has yet to materialize and the Statistics Canada survey suggests that business is generally unwilling to bet on expansion in the current global economic climate.

"Canadian businesses have taken a cautious turn amid an uncertain outlook and weaker commodity prices," said Benjamin Reitzes, an economist with BMO Capital Markets.

"The softness in private sector capital spending intentions doesn't bode well for 2013 growth, especially given hopes the sector would be a key contributor. Surprisingly firm government (capital) spending plans will provide some cushion, but growth drivers are in conspicuously short supply for 2013."

Jimmy Jean of Desjardins Capital Markets says one encouraging signal in the report was that intended purchases of machinery and equipment remain positive, with manufacturers planning to hike spending by 10. …

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