Private and public investment, 2005 Intentions: Statistics Canada

(Feb. 1, 2005) – Robust profits, high oil prices, infrastructure improvements and an increase in manufacturing investment should all combine to produce the largest boost to investment intentions in recent years. Businesses expect to increase investment by 8.4% in 2005 to $188.3 billion.

This expected lift to business investment comes just as spending on housing appears to be leveling off. All together, investment should increase 6.0% to $258.6 billion. Housing is expected to remain virtually unchanged in 2005 at just over $70 billion. The expected decline in housing starts will be offset by higher house prices and the strength in the renovation segment.

Oil sands projects lead the increases

The non-conventional oil extraction industry, buoyed by prices that ensure the feasibility of many new projects, is the largest contributor to growth in the mining and oil and gas sector with an increase of $2.4 billion. This increase, combined with just over $1 billion from the conventional industry and another $562 million from mining help push the sector up 12.2% to $37.7 billion.

Manufacturing investment has seen lackluster increases for several years but 2005 appears to reverse this trend. Steadily high rates of capacity utilization and slowing rates of machinery replacement appear to have had an effect. Manufacturing investment is expected to increase 14.9% to $22.1 billion, largely driven by investment in refineries (up 36.6%), wood products (up 60.8%) and chemical manufacturing (up 23.7%). Overall 18 of 21 manufacturing industries are planning increases.

Government investment continues to trend up, specifically investment in infrastructure. Both local (+18.9%) and provincial (+10.8%) governments are anticipating significant increases. In both cases the majority of the increase will be for construction.

The outlook for investment in utilities has brightened thanks to a 13.5% increase in the electric power industry. On the whole, utilities are expected to increase investment 13.1% to $15.4 billion.

Ontario still has the largest share of the total investment intentions at 35%. Alberta takes over second place at 20% due to the increases in the oil and gas industry and Quebec is a close third at 19%.

Total spending on plant and equipment breaks down as follows; non residential construction is expected to increase 10.2% to $88.5 billion in 2005, while spending on machinery and equipment is expected to rise 6.9% to $99.8 billion.

All provinces and territories expect gains

Investment intentions increased in every province and territory, led by the Northwest Territories (+36.4%) and Saskatchewan (+12.6%).

Investment in Quebec is anticipated to edge up 2.2% to $50.2 billion. Alberta should reach $52.3 billion (+7.8%) and Ontario is expected to hit $90.7 billion (+5.9%).

Stronger gains in 2004

Preliminary actual figures for 2004 indicate that investment is stronger now than original intentions reported last year. Total investment should reach $243.9 billion, an increase of 8.5% and much stronger than the 3.1% gain originally reported for 2004 intentions last year. The largest contributor is housing, up 14% to just over $70 billion. The number of housing starts hit a 17-year high in 2004 as they were positively influenced by very attractive interest rates and their positive impact on affordability. Renovations (also positively affected by the low mortgage rates) contributed significantly to the growth. Investment in oil and gas extraction and public administration also made major contributions to growth in 2004.

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Source: Statistics Canada