{"id":2893,"date":"2025-02-26T16:18:32","date_gmt":"2025-02-26T16:18:32","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2025\/02\/26\/trade-uncertainty-risks-extending-decades-of-under-investment-in-canada\/"},"modified":"2025-02-26T16:18:32","modified_gmt":"2025-02-26T16:18:32","slug":"trade-uncertainty-risks-extending-decades-of-under-investment-in-canada","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/trade-uncertainty-risks-extending-decades-of-under-investment-in-canada\/","title":{"rendered":"Trade uncertainty risks extending decades of under-investment in Canada"},"content":{"rendered":"

After a mostly challenging two decades, a rebound in planned business capital expenditures in Statistics Canada\u2019s annual 2025 CAPEX intentions survey would still leave overall real business investment (excluding price impacts on a per-worker basis) at low levels that are practically unchanged from 2005.<\/p>\n

Relative to the survey results, the outlook is also decidedly cloudier now given tariff-related uncertainty that only intensified after the sample period had concluded in January. Investment plans have likely already been dialed back, particularly in trade-exposed sectors like manufacturing. <\/p>\n

Overall, another round of weak investment spending risks extending Canada\u2019s decades long productivity crunch, turning trade threats in the near-term into structural damage in the economy that can\u2019t be easily reversed. <\/p>\n

Canadian investment intentions still soft after accounting for trade escalation and higher prices<\/h3>\n

Statistics Canada\u2019s annual survey on business investment intentions today showed that private businesses planned to spend 5.5% more on investment in 2025 \u2013 after a downwardly revised 0.1% increase in 2024 (relative to intentions a year ago for a 4.6% increase). <\/p>\n

The rise in 2025 is concentrated in the goods-producing side of the economy, particularly in manufacturing (+15.5%). On the services side, accommodation and food services was the bright spot (+11.8%), but with offset coming from weaker intentions among other services industries. Public sector spending is expected to rise by 5.7%, adding to a 12.3% jump in 2024.<\/p>\n

The caveat, however, is the fact that the survey period (September to January) largely pre-dated the escalation in international trade uncertainty in late January and February. That means the annual intentions for 2025 are likely overstated, particularly for the manufacturing sector given large exposure to international trade headwinds stemming from heavy production integration with the United States. <\/p>\n

And it\u2019s still worth mentioning that the survey reports nominal Investment spending, where most of the growth in the past years was driven by higher prices. Indeed, at last count in Q3 2024, the average price of business investments was up 23% since 2019, while \u2018real\u2019 investment that excludes price impacts was down 2.3% from levels a year ago and 2.2% lower than levels in pre-pandemic 2019. <\/p>\n

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