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Non-residential Capital Expenditures: 2014 Preliminary Actual Estimates and 2015 Intentions

Non-residential Capital Expenditures: 2014 Preliminary Actual Estimates and 2015 Intentions

by Valérie Gaudreault, Guy Gellatly and Cyndi Bloskie
Investment, Science and Technology Division and Analytical Studies Branch

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This article in the Economic Insights series reports on the capital expenditure estimates for 2014 and the expenditure intentions for 2015, released by Statistics Canada on July 6th 2015. The article examines changes in the pace and composition of non-residential capital spending, highlighting key movements in the data for these reference years.Note 1

The results presented in this article are based on information collected from the Capital and Repair Expenditures Survey, a sample survey of approximately 25,000 private and public organizations that is used to produce current dollar estimates of capital spending on different construction and machinery and equipment assets.Note 2 The preliminary actual estimates for 2014 and the intentions data for 2015 that are discussed in this article were collected from October 2014 to late January 2015—a period characterized by sharp movements of crude oil prices and the Canadian dollar. Updates to the data for larger oil and gas businesses were conducted to ensure that the 2015 intentions were as accurate as possible. This article highlights key movements in the capital expenditures and intentions data collected during this period.

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Overview

Private and public organizations spent $264.9 billion on non-residential construction assets and machinery and equipment (M&E) in 2014, up 3.4% from 2013 (Chart 1). Higher outlays on machinery and equipment led growth in 2014, increasing 9.2% after a 4.9% decline in 2013. Capital spending on non-residential construction edged up 0.9% in 2014. The overall growth in capital spending in 2014 was supported by higher outlays in utilities, information and cultural industries, and manufacturing, as capital expenditures in mining, quarrying, and oil and gas extraction declined modestly from the previous year (-0.5%). Capital spending in Ontario, British Columbia, Newfoundland and Labrador, Manitoba and Alberta contributed to growth in 2014.

Private and public organizations anticipate spending $251.8 billion on non-residential capital assets in 2015, down 4.9% from 2014. Lower anticipated outlays on construction assets and machinery and equipment both contributed to the decline. Capital intentions in mining, quarrying and oil and gas extraction industries are down 18.7% from 2014 expenditure levels, while capital outlays in transportation and warehousing industries and manufacturing industries are expected to increase. Intentions are higher in Quebec, New Brunswick, Manitoba, Nova Scotia and Prince Edward Island.

Chart 1 Non-residential capital expenditures by major component

Description for chart 1

Higher outlays on machinery and equipment in 2014

Based on preliminary estimates, expenditures on M&E roe 9.2% in 2014, following two consecutive annual declines.Note 3 Capital outlays on M&E in 2014 accounted for 32% of total non-residential capital spending. Manufacturing industries led the overall growth in M&E during 2014, as capital expenditures in this sector increased 22.8%, following a 4.4% increase in 2013. At $12.5 billion, M&E expenditures in the manufacturing sector were at their highest level since reaching $14.4 billion in 2008. M&E expenditures in transportation and warehousing industries also expanded in 2014, the fifth consecutive annual increase. Annual M&E expenditures in this sector were 7.6% above 2007 levels. Spending in Ontario, Alberta and British Columbia led the overall increase in M&E outlays.

The pace of capital spending on construction assets slowed in 2014, edging up 0.9% after advancing by 6.5% in 2013. This follows an average annual increase of 13% during the previous three years. Higher construction outlays in utilities and information and cultural industries supported growth in 2014, as did an increase in mining, quarrying and oil and gas extraction (0.9%). In 2014, capital expenditures on construction assets in mining, quarrying and oil and gas extraction were 65% higher than in 2008 and accounted for 40% of all spending on construction assets in the Canadian economy. Spending on construction in Newfoundland and Labrador, Ontario, Manitoba and British Columbia supported growth in 2014, while construction expenditures in Alberta declined.

Lower anticipated capital spending in 2015 as intentions for non-residential construction and M&E both decline

Non-residential capital spending intentions declined 4.9% in 2015, reflecting lower anticipated capital spending on machinery and equipment (-5.4%) and construction assets (-4.7%). Lower intentions in mining, quarrying, and oil and gas extraction industries contributed most to the expected decrease, as both anticipated spending on construction assets and machinery and equipment declined markedly (Chart 2). Lower expected expenditures were also reported for construction assets and M&E in utilities industries, while both transportation and warehousing and manufacturing anticipate higher expenditures for both asset types. Overall, lower construction intentions in 2015 largely reflect anticipated declines in Alberta and Saskatchewan, while lower M&E intentions largely reflect anticipated decreases in Alberta and Ontario.

Chart 2 Capital expenditures by selected industry

Description for chart 2

Capital intentions in mining, quarrying and oil and gas extraction down 18.7%

Following a 0.5% decline in 2014, capital spending in mining, quarrying and oil and gas extraction industries is anticipated to fall by 18.7% in 2015, on both lower construction intentions (down 16.3% from 2014 levels) and M&E intentions (down 33.5%). Capital intentions in these industries amount to $67.9 billion in 2015, down $15.6 billion from the expenditure estimates for 2014 (Chart 3). Oil and gas extraction industries, with intentions of $55.6 billion in 2015, anticipate spending 18.9% less on capital assets than in 2014. Capital intentions for organizations that provide support services for mining and oil and gas extraction, which include rigging and drilling services, amount to $1.4 billion in 2015, down 62.9% from 2014 levels. With capital intentions of $10.9 billion, mining and quarrying industries, excluding oil and gas, anticipate a 1.7% decline in capital spending.

Manufacturers anticipate higher capital spending in 2015

Capital spending in the manufacturing sector is expected to increase 2.7% in 2015 to $17.5 billion, up $462 million from 2014 levels (Chart 3). Manufacturers of wood products, petroleum and coal products, primary metals, non-metallic mineral products, and machinery equipment all anticipate higher capital expenditures in 2015, while manufacturers of chemicals, transportation equipment and food products anticipate lower spending. Transportation equipment manufacturers anticipate spending almost 30% less on capital assets, following a 56% increase in 2014. Anticipated capital spending by food manufacturers is down 7.9%, following a 7.2% increase in 2014.

Transportation and warehousing industries anticipate spending 13.4% more on capital assets in 2015. Intentions in this sector, at $26.4 billion, are $3.1 billion higher than 2014 expenditure levels (Chart 3). Organizations that provide transit and ground passenger transportation, support activities for other transportation industries, and warehousing reported higher capital intentions. In particular, organizations that provide pipeline transportation services anticipate higher capital expenditures in 2015, up 21.8% to $8.3 billion. This follows lower capital spending in 2014 after gains in both 2012 and 2013.

Chart 3 Change in capital expenditures and anticipated capital spending, 
by selected industry

Description for chart 3

Capital spending intentions down nearly 10% in western Canada

Public and private organizations in the Western provinces anticipate spending 9.3% less on non-residential capital assets in 2015 (Chart 4). This follows slower growth in 2014, as capital spending rose 3.0% on gains in Manitoba and British Columbia. From 2011 to 2013, capital expenditures in western Canada increased, on average, by 10% a year, led by higher spending on construction and M&E investments in Alberta and Saskatchewan. The four Western provinces accounted for 56% of all non-residential capital spending in 2014, and 65% of all capital expenditures on privately owned non-residential assets.

Chart 4 Capital expenditures by region

Description for chart 4

Lower 2015 intentions in western Canada reflect anticipated declines in Alberta, Saskatchewan and British Columbia. Capital spending in Alberta is anticipated to decline by 11.0% in 2015, on both lower construction intentions (down 9.0% from 2014 levels) and M&E intentions (down 17.0%). Anticipated spending in Alberta is down $10.1 billion, to $82.0 billion. Capital spending on privately owned assets in Alberta is expected to decline 11.3% in 2015, while intentions on public assets are down 8.1%. Anticipated spending on assets under private ownership account for 89% of all capital intentions in Alberta.

Chart 5 Change in capital expenditures and anticipated capital spending by province and territories

Description for chart 5

Total capital expenditures by oil and gas extraction industries in Alberta are expected to fall by 18.5% in 2015. Organizations in Alberta that provide support services to mining and oil and gas extraction industries anticipate spending 69.5% less on capital assets in 2015.

Total capital spending in Saskatchewan is anticipated to decline by $2.3 billion, to $15.5 billion. Capital spending by the oil and gas extraction industry in the province is anticipated to be 33% lower in 2015. Mining and quarrying intentions are down 12.3%. Anticipated spending on privately owned assets accounts for 77% of total intentions in Saskatchewan.

Higher intentions in Quebec and lower intentions in Ontario

Overall capital intentions in central Canada are flat, following a 3.5% increase in 2014 (Chart 4). Quebec and Ontario together accounted for 37% of all non-residential capital expenditures in 2014.

Capital intentions in Quebec rose 2.7% in 2015, after two consecutive years of lower spending. Expenditures on construction assets and M&E are both expected to rise in 2015. Manufacturing industries in Quebec anticipate spending 4.1% more on capital assets in 2015, after also reporting higher expenditures (+14.4%) in 2014. The growth in manufacturing intentions was supported by higher anticipated spending among primary metal manufacturers. In 2015, anticipated spending on public assets in Quebec increased 8% to $19.2 billion. Overall intentions on privately owned assets fell 2.4%, to $18.1 billion.

Non-residential intentions for 2015 are down 1.5% in Ontario, following a 9.5% increase in capital spending in 2014. Lower intentions on M&E (down 4.3%) accounted for the decline. This follows an 18.3% rise in M&E spending in 2014. Ontario manufacturers anticipate spending 9.5% less on capital assets in 2015, led by lower spending in the transportation equipment industry.

Anticipated capital outlays in Ontario are below expenditure levels in recent years. Intentions for 2015 are $61.4 billion, down $941.7 million from expenditures in 2014 (Chart 5). In 2007, non-residential capital expenditures in Ontario were $63 billion, about 2.6% higher than current intentions. Intentions on public assets, which account for 45% of anticipated capital spending in Ontario, fell 5.6%, while intentions on private assets rose 2%.

Capital intentions increase in Atlantic Canada

Capital intentions in Atlantic Canada are up 4.2% in 2015. This follows increases of 6.4% in 2014 and 8.8% in 2013. New Brunswick contributed to higher intentions in 2015, as both spending on M&E and construction is anticipated to increase. Intentions for M&E and construction are also higher in Nova Scotia. Overall intentions for Newfoundland and Labrador edged down 0.2% on lower anticipated M&E spending.

Private sector capital intentions for 2015 were up in each province, led by a 7.2% increase in Prince Edward Island. Anticipated public capital spending rose by double digits, with the exception of Newfoundland and Labrador where it dipped following a 30% gain the year before.

Table 1
Annual growth rates of capital expenditures on non-residential construction and machinery and equipment, by asset type, ownership, industry and province and territories, 2007 to 2015
Table summary
This table displays the results of Annual growth rates of capital expenditures on non-residential construction and machinery and equipment 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015, calculated using percentage change units of measure (appearing as column headers).
  2007 2008 2009 2010 2011 2012 2013 2014 2015
percentage change
Total non-residential capital expenditures 6.3 6.4 -13.9 13.4 7.7 6.0 2.7 3.4 -4.9
Asset type  
Non-residential construction 11.3 15.2 -11.6 19.3 9.6 9.9 6.5 0.9 -4.7
Machinery and equipment 0.9 -4.1 -17.2 4.4 4.5 -1.1 -4.9 9.2 -5.4
Ownership  
Private 3.9 2.0 -21.1 14.0 13.1 7.7 5.0 0.7 -7.0
Public 14.1 19.2 4.1 12.3 -2.6 2.2 -2.5 10.5 -0.2
Industry  
Mining, quarrying, and oil and gas extraction 3.9 9.8 -35.9 52.5 26.3 15.6 7.1 -0.5 -18.7
Manufacturing 3.2 -2.6 -30.1 11.3 14.7 -0.9 3.9 8.1 2.7
Transportation and warehousing 21.7 15.8 -10.2 -13.6 12.5 24.2 33.9 -4.6 13.4
Utilities 14.8 9.1 17.1 0.6 10.2 6.8 13.9 6.8 -1.1
Other industries 4.9 4.7 -6.6 7.3 -2.6 -1.3 -8.2 6.9 -0.7
Province and territories  
Newfoundland and Labrador -1.2 25.4 -3.1 14.1 43.1 27.7 22.5 14.0 -0.2
Prince Edward Island 17.1 -3.3 -3.9 -2.9 26.7 -25.2 7.2 1.7 7.6
Nova Scotia 0.6 -12.3 10.8 8.6 -2.1 -17.4 -0.6 3.4 9.2
New Brunswick 3.0 9.5 -11.9 2.0 8.9 -25.3 -8.4 -9.8 11.9
Quebec 6.7 5.8 -3.8 1.2 6.6 8.6 -4.5 -5.3 2.7
Ontario 5.3 -3.4 -9.7 13.5 2.2 -1.5 -9.4 9.5 -1.5
Manitoba 11.2 12.6 -2.2 13.7 -0.6 3.8 -2.3 25.0 4.5
Saskatchewan 8.6 23.0 11.8 20.1 10.5 7.4 12.4 -2.3 -12.9
Alberta 8.9 12.6 -29.2 23.7 15.0 11.7 16.6 0.4 -11.0
British Columbia 2.3 12.3 -14.8 7.9 3.5 12.2 -8.2 9.4 -6.3
Territories 4.4 -10.7 -17.4 32.7 -6.6 -9.1 42.7 8.2 -3.6

Capital intentions on exploration and evaluation down 25.1% to $6.8 billion

Capital expenditures on exploration and evaluation are comprised of oil and gas exploration drilling, geological, geophysical and other oil and gas exploration and evaluation costs, as well as mineral exploration.Note 4 Spending on these activities totalled $9.1 billion in 2014, led by expenditures of $3.7 billion in Alberta and $2.5 billion in British Columbia. With anticipated declines of 26% in Alberta and over 50% in British Columbia, overall exploration intentions fell 25.1% in 2015. The only provinces to anticipate notable increases in exploration spending are Quebec (+36.9%), and Newfoundland and Labrador (+66.3%).

Table 2
Shares of total capital expenditures on non-residential construction and machinery and equipment, by asset type, ownership, industry and province and territories, 2007 to 2015
Table summary
This table displays the results of Shares of total capital expenditures on non-residential construction and machinery and equipment. The information is grouped by Total non-residential capital expenditures (appearing as row headers), 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015, calculated using percent units of measure (appearing as column headers).
Total non-residential capital expenditures 2007 2008 2009 2010 2011 2012 2013 2014 2015
percent
Asset type  
Non-residential construction 54.4 58.9 60.5 63.7 64.7 67.1 69.5 67.9 68.0
Machinery and equipment 45.6 41.1 39.5 36.3 35.3 32.9 30.5 32.1 32.0
Ownership  
Private 74.5 71.4 65.4 65.8 69.0 70.1 71.6 69.7 68.2
Public 25.5 28.6 34.6 34.2 31.0 29.9 28.4 30.3 31.8
Industry  
Mining, quarrying, and oil and gas extraction 23.8 24.6 18.3 24.6 28.8 31.4 32.8 31.5 27.0
Manufacturing 8.4 7.7 6.2 6.1 6.5 6.1 6.2 6.4 7.0
Transportation and warehousing 6.9 7.5 7.8 6.0 6.2 7.3 9.5 8.8 10.5
Utilities 8.2 8.4 11.4 10.1 10.4 10.4 11.6 11.9 12.4
Other industries 52.7 51.8 56.2 53.2 48.1 44.7 40.0 41.3 43.2
Province and territories  
Newfoundland and Labrador 1.2 1.5 1.7 1.7 2.2 2.7 3.2 3.5 3.7
Prince Edward Island 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2
Nova Scotia 2.0 1.7 2.1 2.0 1.9 1.4 1.4 1.4 1.6
New Brunswick 1.9 2.0 2.0 1.8 1.9 1.3 1.2 1.0 1.2
Quebec 16.0 16.0 17.8 15.9 15.7 16.1 15.0 13.7 14.8
Ontario 30.0 27.3 28.6 28.6 27.1 25.2 22.3 23.5 24.4
Manitoba 2.9 3.0 3.5 3.5 3.2 3.1 3.0 3.6 4.0
Saskatchewan 3.9 4.5 5.9 6.2 6.4 6.5 7.1 6.7 6.1
Alberta 29.6 31.3 25.7 28.1 29.9 31.5 35.8 34.8 32.6
British Columbia 11.1 11.7 11.6 11.0 10.6 11.2 10.0 10.6 10.4
Territories 0.9 0.8 0.7 0.9 0.7 0.6 0.9 0.9 0.9

References

Bloskie, C., V. Gaudreault, and G. Gellatly. 2013. Changes in the Composition of Aggregate Investment. Economic Insights, no. 22. Statistics Canada Catalogue no. 11-626-X. Ottawa: Statistics Canada.

Statistics Canada. 2015. Reconciliation of capital expenditure and gross fixed capital formation. Latest Developments in The Canadian Economic Accounts. Statistics Canada Catalogue no. 13-605-X. Ottawa: Statistics Canada.

Notes

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