Tuesday, March 21, 2017

Are there hopes for reversing declining business investment in Canada?

The Bank of Canada’s recent decision to keep the key interest rate unchanged was seemingly counter to the latest series of more upbeat economic statistics. Canada’s GDP beat economists’ expectations and grew by 2.6% in the fourth quarter of 2016. The growth in the third quarter was revised up to 3.8%, while the growth in 2016 as a whole, 1.4%, exceeded the growth in 2015 of 0.9%.
Key factors driving the Bank of Canada’s cautious stance focus on the decline in business investment, by 10.7% in 2016, and the prospects of protectionist trade policies on the part of the US. In the fourth quarter, non-residential business investment was down 17.4%. By comparison, residential investment was up 4.8% in the same quarter. The situation with business investment in Canada is so grave that David Parkinson called it “moribund”, or “near death”, in his recent report in the Globe and Mail.
At the same time, while business investment is falling, the Bank of Canada is reporting on the recovery of the balance of opinion on investment intentions. In the fourth quarter, the balance between the percentage of firms expecting higher investment and the percentage expecting lower investment, was 24%. This was the highest number since mid-2014. Well, it seems that we can now only wait until these intentions materialize.

Source: bankofcanada.ca
Ukrainian Credit Union Limited

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