In a sign that 2014 will be another year of mediocre growth for B.C.’s economy, Statistics Canada’s annual survey of investment intentions for construction, machinery and equipment (capex) points to a slight deceleration in capital investment this year.
Soft commodity markets and government belt-tightening will restrain mining and public-sector activity.
Current-dollar expenditure in capex is anticipated to reach $47.5 billion this year based on survey findings, a 0.1% decline from 2013. This reflects a 0.2% drop in construction investment, as machinery and equipment investments are expected to increase by 0.6%. In comparison, anticipated growth for Canadian capex as a whole is 1.4%, led by Alberta and Central Canada.
This will mark a second straight year of flat or declining nominal investment and adding in modest construction inflation points to a drop in real investment and a damper on economic growth.
Excluding housing, the capex outlook is significantly weaker and is expected to decline 1.5%.
Soft commodity pricing and outlook and a difficult financing environment cut anticipated mining and oil and gas extraction investment by 13% compared with 2013. This is largely related to lower mine construction investment, which is anticipated to fall 44% to a five-year low.
Meanwhile, public administration is expected to hold investment levels unchanged in nominal terms, with a provincial contraction being offset by federal and municipal investment growth.
In contrast, capital investment plans for 2014 are up in manufacturing by 5% on the heels of a 48% gain in 2013. Companies are focused on investment related to wood products and paper, reflecting improved demand from U.S. and Asian markets and improved competitive edge due to the lower Canadian dollar.
Tempered investment is in line with Central 1’s expectation for about 2% GDP growth this year. While some sectors anticipate a broad pickup in demand to drive investments in sectors related to manufacturing and domestic growth, mining investment will require a recovery in commodity prices. Investment is expected to pick up sharply in 2015 and beyond.
