Business Investment Picks Up in Canada; But Ontario’s Slide Continues: C.D. Howe Institute
TORONTO, Aug. 9, 2012 /CNW/ – Business investment in Canada is picking
up relative to its international peers, but underlying problems remain,
according to a report released by the C.D. Howe Institute. In “From
Living Well to Working Well: Raising Canada’s Performance in
Non-residential Investment,” authors Benjamin Dachis and William B.P.
Robson identify widely divergent performances by provinces and a surge
in the flow of funds to the residential sector away from the
non-residential sector as problems to be addressed by policy reforms.
“Policies that enhance competition and remove biases against
non-residential investment could boost capital spending by businesses
and improve Canadian workers’ prospects for higher incomes,” said
Benjamin Dachis, Senior Policy Analyst.
The authors compare business investment in plant and equipment per
worker in Canada with that of its OECD peers and the United States.
Projections for 2012 show that Canadian businesses are set to invest
more per worker than the OECD average – 105 cents per dollar across the
group – the best performance against other developed countries since
the early 1990s. Dachis and Robson calculate that, in 2012, Canadian
business investment per worker will rise to 91 cents per dollar
invested in the United States, up from an average of 85 cents during
the previous decade.
But they note Canada’s relative improvement owes much to outperformance
by resource-rich provinces, while Central Canada and the Maritime
provinces are struggling. Another troubling trend: residential
construction’s share of total business capital spending has risen to
almost two-fifths (37 percent) since 2009, with the share of
non-residential investment in factories and equipment declining over
this period. “While residential construction has been a welcome support
to Canadian demand and output since the crisis, policies that favour it
may exact a longer-term cost by crowding out non-residential capital
investment,” said William Robson, President and CEO of the C.D. Howe
SOURCE C.D. Howe Institute