Economic circumstances suggest that investment growth should be strengthening. Capacity utilisation is at a decade high, the unemployment rate is unusually low and wage growth is picking up. Machinery and equipment investment growth was very strong in the first quarter. According to the Bank of Canada’s latest Business Outlook Survey, however, that strength will not be sustained through the remainder of this year. The balance of companies intent on increasing investment dropped in the second quarter to a level consistent with a stagnation in investment in the second half of this year. Although we do not know for certain why firms’ investment intentions have declined, it seems pretty likely that trade uncertainty, including the future of NAFTA and potential US tariffs on autos, is the big concern. Weakening business investment growth would spell trouble for the economy, particularly at a time when residential investment seems almost certain to drop from current high levels.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services