Canadian business capital spending growth seen stalling in 2013

Wed Feb 27, 2013 11:06am EST
 

By Randall Palmer

OTTAWA (Reuters) - Canadian businesses hardly expect to boost their capital spending at all this year, despite hopes by the Bank of Canada for a good contribution to growth from fixed investment.

Statistics Canada said on Wednesday its survey showed the private sector anticipated investment in construction and machinery and equipment would rise 0.8 percent, the worst rate since a 16.4 percent decline in 2009. In 2012 such spending rose 7.8 percent.

The figure includes a planned 0.2 percent increase in housing construction by businesses and individuals, Statistics Canada analysts said. Excluding housing, private sector investment plans are expected to grow 1.1 percent.

The biggest contributor to the slowdown will be a 2.7 percent decline in investment by the mining, oil and gas extraction sector, which accounts for more than a quarter of all private-sector investment.

Construction and machinery and equipment investment by the public sector is expected to rise 5.0 percent. The public and private sectors together should see a rise of 1.7 percent after a 2012 increase of 7.2 percent.

The Bank of Canada's January Monetary Policy Report looked to business fixed investment to add 0.5 percentage points to annual real growth in gross domestic product in 2013, with housing taking 0.1 point off growth.

"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," BMO Capital Markets senior economist Benjamin Reitzes said in a note to clients.

"Surprisingly firm government spending plans will provide some cushion, but growth drivers are in conspicuously short supply for 2013."

(Editing by Maureen Bavdek)

 
Workers walk through a newly opened Toyota automobile assembly plant in Woodstock, about 130 km (81 miles) southwest of Toronto, Ontario, December 4, 2008. REUTERS/Mark Blinch