Northern Exposure

It’s often said that Americans are benevolently ignorant about Canada, while Canadians are malevolently well informed about the United States. It’s safe to say that’s probably true for Americans and any other country you’d like to mention. But since Compact Equipment has a significant Canadian readership (some 600 readers) and relevant knowledge only adds to increasing decision power, we felt a Canadian construction market overview for 2011 would be a helpful resource. And what we found was surprisingly promising (compared to our American economic outlook).  

Investment in capital construction, machinery and equipment for Canada is expected to rise 3.3 percent in 2011 to $349.1 billion (Canadian currency), according to a recent report by Statics Canada (www.statcan.gc.ca). Much of the recovery from the 2009 economic downturn occurred in 2010 due to strong growth on the part of both public (up 17.5 percent) and private (up 8.0 percent) investment. If intentions are realized, increases in 2011 will be led by private investment, which is expected to grow 3.8 percent to $261.3 billion. Significant private capital spending intentions are anticipated from the mining and oil and gas extraction sector, which is expected to grow 11.4 percent to $53 billion.

Housing starts are forecast under high, medium and low scenarios by Canada Mortgage and Housing Corp. These scenarios are used to estimate new housing investment, a key component of the overall housing forecast estimates. The 2011 estimates for housing in this story are based on the mid-case scenario for each province.

Investment intentions for non-residential construction and machinery and equipment are based upon a sample survey of 28,000 private and public organizations. This survey was conducted between October 2010 and late January 2011. Data in this story are expressed in current Canadian dollars.

Non-residential construction is expected to increase 3.6 percent to $240.6 billion and will account for more than two-thirds of total capital spending. Canada’s housing sector is forecast to increase to $94.7 billion in 2011, up 1.5 percent, following 15.5 percent growth in 2010.

Mining and Oil and Gas Extraction Sector Fuels Investment

Investment intentions by companies in the oil and gas extraction sector will reach an estimated $35.7 billion in 2011, up $3 billion (up 9.1 percent) from 2010. Powered by a host of new projects in the Alberta oil sands, investment in non-conventional oil extraction is expected to rise 27.8 percent in 2011 to $14.3 billion. Investment in the mining sector is expected to total $11.5 billion in 2011, up 23.8 percent. This is the second year of strong growth in this sector, following a 31.8 percent increase in 2010. Much of the additional capital spending is earmarked for the development of several metal ore mining projects. Investment in support activities for mining and oil and gas extraction is expected to rise 3.9 percent in 2011 to $5.7 billion.

Primary Metal Manufacturing Set to Increase

Overall, the manufacturing sector intends to invest 15.1 percent more on capital construction and machinery and equipment in 2011, reaching a total of $17.1 billion. This growth is expected mainly because of strong gains in the primary metal manufacturing industry (up 67.7 percent), which will account for more than half of the entire sector’s expected increase. Investment intentions for most of the remaining industries in this sector are expected to increase modestly from 2010. Canada’s transportation and warehousing sector is expected to rise 14.4 percent to $22.1 billion in 2011. Most of this increase can be attributed to an increase of over $1.5 billion (up 28 percent) in the transit and ground passenger transportation industry.

Investment by Public Administration Expected to Remain Stable

Following a 19.3 percent increase in 2010, investment spending by the public administration sector is expected to total $42.8 billion, down 0.2 percent. Only provincial governments are expecting to increase their capital spending in 2011. Provincial government capital outlays are expected to reach a total of $17.5 billion, up 2.5 percent. Spending by the federal government is expected to fall by 7.2 percent, while municipal capital spending is expected to decrease slightly by 0.4 percent.

Investment Increases in Most Regions

Although increases in investment intentions are widespread across Canada, both Alberta and Quebec show considerable strength. Capital outlays in Alberta are expected to increase 4.3 percent to $73.5 billion, primarily due to higher investment intentions in oil and gas extraction. In Quebec, higher investment intentions in the manufacturing, utilities, mining and oil and gas extraction sectors are behind an anticipated increase of 3.8 percent to $66.6 billion.

For more information, visit Statics Canada at www.statcan.gc.ca.