Canadian Capital Spending Trends

Overview

According to Statistics Canada, Canadian companies and organizations are projected to experience a slowdown in capital spending in 2024 compared to previous years. This can be attributed to the impact of high interest rates on economic activity.

Planned Expenditures

The annual survey indicates that planned expenditures on machinery and equipment, as well as nonresidential construction, are expected to increase by 4.5% to 354 billion Canadian dollars in 2024. This represents a deceleration from the significant 13.4% growth in 2022 and an expected 8.2% increase in 2023.

Private-Sector vs. Public-Sector Spending

Private-sector capital spending is forecasted to grow by 4.8% in 2024, exceeding the projected growth rate of public-sector outlays on machinery and nonresidential real estate, which is estimated at 3.9%.

Impact of High Interest Rates

The slowdown in capital spending aligns with findings from business confidence surveys, such as the Bank of Canada's fourth-quarter business-outlook survey. The survey reveals that firms are cautious about near-term sales outlook due to the negative impact of high interest rates, resulting in modest investment intentions and weak hiring plans.

Sectoral Analysis

Statistics Canada suggests that spending on machinery and equipment is anticipated to increase by 6.3% in 2024, while investments in nonresidential construction, including factories and warehouses, are expected to grow by a more moderate 3.6%.

Industry Specifics

Commodities companies are likely to reduce capital spending in 2024, with a projected growth rate of 4.8%, a significant drop from the double-digit increases seen in the previous years. On the other hand, manufacturing is expected to experience a substantial 31% rise in capital spending, driven by clean-energy projects supported by government initiatives.

In conclusion, the outlook for Canadian capital spending in 2024 points towards a moderation influenced by various factors, including high interest rates and differing sectoral dynamics.