Tag Archives: canada’s economic growth

Lack of business investment could derail Canada’s economic growth

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OTTAWA, May 30, 2016 /CNW/ – Business investment outside of the energy sector remains sluggish, despite many manufacturing industries being at or close to full capacity, according to a new briefing released by The Conference Board of Canada.

“For the past year, we at the Conference Board have stressed the need for a rebound in business investment to support Canada’seconomic growth,” said Matthew Stewart, Associate Director, Economic Forecasting and co-author of the briefing. “If non-energy investment does not rebound over the coming months, capacity constraints in some manufacturing industries could impact future growth.”

HIGHLIGHTS

  • In order for exports to continue to drive economic growth, a pickup in non-energy investment aimed at expanding productive capacity is needed.
  • Our current economic outlook assumes a modest increase in non-energy investment spending in the second quarter with a stronger pick up in the second half.
  • Current business investment intentions are much more pessimistic than what is included in our current economic outlook.
  • Most leading manufacturing industries have reached or nearly reached their capacity to continue to grow.
  • Manufacturing industries in particular are expected to reduce capital expenditures this year by an average of 10.9 per cent.
  • Without a pickup in investment, capacity constraints have the potential to upset recent economic momentum.

The transportation equipment, wood products, food, primary metal and paper industries have been the key drivers of manufacturing growth in Canada, accounting for 64 per cent of year-over-year increases in output. These manufacturing industries, which have been leading Canada’s rebound in exports, are at or fast approaching full capacity. In the fourth quarter of last year, the wood products manufacturing industry was operating at 99.3 per cent capacity. Paper manufacturing was not far behind, operating at 98.2 per cent and transportation equipment operated at 97.3 per cent of its capacity. Meanwhile, transportation equipment manufacturing recorded its highest capacity utilization rate in history in the third quarter of 2015.

Despite many manufacturing industries operating near capacity, businesses remain reluctant to invest. In fact, manufacturers across a range of industries expect to cut investment this year by an average of nearly 11 per cent. Moreover, the transportation equipment, wood products, food, primary metal and paper manufacturers are expected to post worse-than-average investment declines.

In the Conference Board’s Index of Business Confidence survey, business leaders cited weak market demand, government policies, a shortage of qualified staff, and the depreciation of the Canadian dollar (which increases the cost of imported technology and machinery) as reasons for not investing. While market demand should improve as the U.S. economy continues to strengthen, the remaining factors—government policies, a shortage of qualified staff, and the depreciation of the Canadian dollar—will likely continue to hold back investment.

While we still expect non-energy investment spending to pick up in the second half of the year as accelerating demand from the U.S. improves the incentive for firms to expand their capacity, the continued lack of investment has the potential to severely limit Canada’s future growth.

The executive briefing is available on The Conference Board of Canada’s e-library.

SOURCE Conference Board of Canada

Source: Lack of business investment could derail Canada’s economic growth

Reverse public spending cuts, introduce progressive measures to boost jobs and growth: CUPE

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Government spending cuts have increased unemployment, are slowing economic growth, and are diminishing services and standards for Canadians.

In its pre-federal budget submission to the House of Commons Standing Committee on Finance, CUPE is expressing deep concerns over the harm these imposed austerity measures are having on Canadians, and the need to strengthen social programs, like the Canada Pension Plan (CPP) and Employment Insurance (EI).

Canada’s economic growth has been much slower than it was in previous recoveries. Federal spending reductions will slow the economy by an average of one percentage point (or close to $20 billion) a year and reduce employment levels by over 100,000, as estimated by the Parliamentary Budget Office last year.

CUPE is recommending an expansion of public services that could generate hundreds of thousands of additional jobs, boost wages, living standards and economic growth. The vast majority of individual Canadians and businesses would benefit from federal government measures focused on improving public services, boosting the economy, generating jobs and reducing inequality.

CUPE also recommends expanding the Canada Pension Plan by phasing in modest contribution increases over seven years that would in time double benefit levels. Improving CPP would benefit all workers, help stabilize existing workplace pension plans, increase economic security and stability for communities, reduce poverty and reduce pressure on social assistance programs.

When CPP contribution rates were last increased, unemployment fell significantly. The increase in contribution rates that we envision is considerably less this time. Polling shows that 75 per cent of Canadians support an expanded CPP, as do many pension experts and the majority of provinces.

CUPE is also advocating for the immediate reversal of cuts to Employment Insurance made in Bill C-38 that reduce eligibility for benefits, force claimants to take unsuitable and lower paid jobs and eliminated the EI Board of Referees.

Introducing different classes of claimants and changing access to EI benefits particularly hurts seasonal workers and those in precarious employment most, including women, youth, low income and other marginalized workers in communities across Canada. Changes to the appeals process has reduced fairness for claimants unjustly rejected. All workers are negatively affected as such changes drive down wages.

Pre-budget submissions are being accepted until August 5, 2013.

Read CUPE’s pre-federal budget submission
(357 kB)