Private and public investment

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Investment in non-residential construction and machinery and equipment is expected to grow 5.8% in 2007, after three years of strong growth.

Based on intentions, businesses and governments plan to spend $230.1 billion on non-residential construction and machinery and equipment in 2007. Of this amount, $121.4 billion is for non-residential construction and $108.7 billion for machinery and equipment, equivalent to a gain of 7.1% and 4.5% respectively compared to 2006.

A jump in public sector investment outlays accounts for about two-thirds of the growth in capital expenditures in 2007. Capital spending outlays by the public administration, the utilities, and the transportation and warehousing sectors account for the bulk of the projected $13.8 billion increase in investment.

For their part, investment by companies in the oil and gas extraction sector will decline slightly in 2007, after several years of strong growth. Similarly, after posting strong growth in 2006, investment in the transportation equipment manufacturing sector is pointing down for the coming year.

At the same time, Canada's housing market is predicted to cool down, with investment forecast at $81.0 billion for 2007, up only 1.4%. This is much slower than the gain of 8.5% in 2006.

Total capital investment including housing, non-residential construction, and machinery and equipment is expected to rise by $13.8 billion to an estimated $311.1 billion in 2007. This is equivalent to a gain of 4.6% compared to last year's rate increase of 8.8%.

Public administration leads all sectors in investment growth

The public administration sector leads all other sectors in projected investment growth of $3.7 billion this year.

Governments' intentions are to spend an estimated $29.3 billion in non-residential construction and machinery and equipment, up 14.5% over 2006.

At the federal level, investment spending for public administration is projected to grow 7.9% in 2007 to $4.3 billion.

The federal share of total government investment in public administration has been declining for several years and now accounts for less than 15% of government capital expenditures on public administration. The provincial and territorial share has remained steady at about a third, while the share of local public administration has risen over the years and now accounts for over half of overall capital expenditures by public administration.

Based on intentions, growth in provincial and territorial public administration capital expenditures continues to be in the double-digits for the third straight year. Much of the additional money is earmarked for several transportation projects. Total spending by the provinces and territories could reach $10.0 billion in 2007, up 18.6% from last year.

Municipalities lead the three levels of government with investment intentions of $15.0 billion on non-residential structures and machinery and equipment. This represents an increase of 13.9% in capital outlays, up $1.8 billion over 2006.

Electric power surges ahead

Investment in the electricity sector will strongly rise by 19.5% to $15.6 billion in 2007, after jumping 32.9% in 2006. This increase, in part, comes from additional investments in nuclear and wind power facilities as well as major upgrades of existing infrastructure.

Investment in natural gas distribution sees another sharp increase in 2007, rising 37.9% to $1.9 billion.

In total, the utilities sector, which includes electric power, natural gas distribution and water and sewage and other systems, plans to invest $20.5 billion in 2007. This is up $3.2 billion or 18.7% from 2006. In 2006, investment in this sector grew by 27.8% from the previous year.

Public transit shifts into high gear

Investment in the transportation and warehousing sector will reach $15.4 billion in 2007, up 10.4% from last year. The strength is anticipated in the transit and ground passenger industry and the support activities for the transportation industry.

The transit and ground passenger industry is set to see investments jump 37.8% on top of last year's increase of 24.6%, driven largely by public transit projects in several cities across the country.

The category "support activities for transportation" will see investments rise 23.3%, or $475 million, this year, in part due to higher investment in airports in several cities across Canada.

Red hot energy sector cools down

After several years of strong investment growth, spending by companies in the oil and gas extraction sector is expected to decline slightly in 2007. Capital outlays in this industry are expected to be $45.0 billion, down 1.5%, or $0.7 billion, from 2006.

This will be entirely due to a $5.2 billion drop in investments by the conventional oil and gas extraction industry with intentions of $29.0 billion in 2007. This is in part, due to weakness in natural gas prices.

Nonetheless, continued interest in Alberta's oil sands will see investment in the non-conventional oil and gas extraction sector rise another $4.5 billion, up 38.9% from last year. Investment in this sector is expected to be over $16.1 billion in 2007.

Non-conventional crude oil now accounts for about 45% of the crude oil extracted in Canada, while production of conventional crude has actually declined in recent years.

Real estate and rental and leasing

The real estate and rental and leasing sector is heading for another good year in 2007, with investment climbing 7.4% to $17.7 billion, a $1.2 billion gain.Most of this growth is from lessors of real estate, who plan to boost spending by 21.1% to $5.6 billion, mostly on new commercial space. This industry saw investment rise 32.9% in 2006.

Strong demand for office space in recent years has resulted in low vacancy rates and rising rents that are in part contributing to the investment boom in this industry.

Several manufacturing industries set to increase investment

Manufacturers plan spending 5.3% more on non-residential construction and machinery and equipment this year. Investment intentions for 2007 are $20.5 billion, up $1.0 billion from 2006.

Growth in manufacturing investment is coming from several industries. The three leaders are primary metal manufacturing (up $531 million or 35.0%), chemical manufacturing (up $345 million or 20.7%), and food manufacturing (up $262 million or 16.7%).

It is a different story in the transportation equipment sector, where after recording a sharp increase last year, investment in 2007 is anticipated to decline 16.2% to $3.6 billion, a drop of $705 million compared to 2006.

New Brunswick, Manitoba, and Quebec lead the way in investment growth

In 2007, investment growth in construction and machinery and equipment is expected to increase the most in New Brunswick (+12.7%), Manitoba (+11.3%), and Quebec (+6.6%). This is in large part due to higher investment intentions in the public administration, utilities, and transportation and warehousing sectors.

On the other hand Saskatchewan, Alberta, British Columbia, and Nova Scotia will all experience a lower growth rate in investment in 2007 compared to 2006, in large part the result of a drop in spending in the mining and oil and gas sector.

Newfoundland and Labrador, Nunavut, and Yukon all expect declines in investment for the second consecutive year.

Newfoundland and Labrador will see investment decline 7.6% this year. This follows a 1.0% contraction in 2006. Lower investment in the mining and oil and gas sector will account for most of this drop.

Investment growth is expected to be above the national average in the Northwest Territories, while it will be weaker than the Canada level in Prince Edward Island and Ontario.

Available on CANSIM: tables 029-0005, 029-0007 to 029-0022, 029-0024, 032-0001 and 032-0002.

Definitions, data sources and methods: survey number 2803.

Summary data are available under the Summary tables module online.

The publication Private and Public Investment in Canada, Intentions 2007 (61-205-XIE, free) will soon be available.

For further information, or to enquire about the concepts, methods or data quality of this release, contact Les Shinder (toll-free 1-877-338-2368; 613-951-2030; shinder@statcan.gc.ca) or Irfan Hashmi (toll-free 1-800-571-0494; 613-951-3363; irfan.hashmi@statcan.gc.ca), Investment and Capital Stock Division.

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