Canadian business investment is being weighed down for a fourth straight year by weakness in Alberta’s energy industry.
Spending plans for oil and gas capital projects this year are down 12 percent to C$33.2 billion ($26 billion) from 2017, according to a Statistics Canada survey published in Ottawa. The spending total has declined in each of the last four years from a peak of C$76.1 billion. The province of Alberta was the biggest contributor to the decline.
Weakness in energy limited the gain in overall spending on non-residential construction and machinery and equipment to 0.8 percent for 2018, to C$238.6 billion. That’s a slowdown from the 2017 increase of 3 percent and still below the total of C$272.1 billion set in 2014 before a plunge in crude oil prices.
Business investment has been one of the weak spots in a broad Canadian economic expansion, with growth being led more by government and consumer spending. Bank of Canada policy makers have said a shift to an expansion led by business is important to create a durable recovery.
“Forget about Canadian businesses opening their wallets this year,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce in Toronto, wrote in a research note.
Even with gains outside energy, overall private spending plans are poised to fall 1.1 percent this year. Public sector spending plans are up 4.1 percent.
Canadian Finance Minister Bill Morneau, speaking in Ottawa Wednesday morning, said the discounted price paid for Canadian oil “has a significant impact on people’s investments,” and that he hopes government measures to overhaul pipeline reviews will turn around a decline in energy sector spending. “Our intent is to follow through to get to an assessment approach that will give people more project certainty, and we hope that will lead to more investment over time.”