Capital plans rising sharply

February 28, 2008
Winnipeg Free Press
Written by: Murray McNeill

MANITOBA businesses and governments aren't letting the threat of a U.S. recession crimp their free-spending style.

For the second year in a row, Manitoba is expected to lead the country in capital spending growth in 2008, Statistics Canada said Wednesday.

The agency said the province's private and public sectors are expected to pour an estimated $10.9 billion into construction projects and machinery and equipment purchases this year.

That would be an 18.8-per-cent increase over the $9.2-billion they spent in 2006, and more than triple this year's projected national average increase of 5.2 per cent.

The only provinces expected to come even close to that kind of spending growth are Saskatchewan, at a projected 18.0 per cent, and Newfoundland and Labrador at an anticipated 15.0 per cent.

The other seven are all likely looking at single-digit gains.

Statistics Canada's projections are based on the results of a recent survey of 28,000 Canadian business and governments who were asked about their capital spending plans for 2008.

What's particularly encouraging, according to the province's chief statistician, is that it's the private sector that's leading the charge.

Wilf Falk said Statistics Canada is predicting that $7.8 billion of this year's $10.9 billion will be spent by the private sector.

That's an increase of 22.4 per cent from last year, while spending by governments and other public sector organizations is expected to rise by a more modest 10.76 per cent.

Statistics Canada said $7.1 billion has been earmarked for construction projects, and $3.8 billion for machinery and equipment purchases.

Falk said Manitoba's big-spending ways are a byproduct of an economy that's firing on all cylinders.

"Manitoba has averaged three per cent (real GDP) growth over the last four years," Falk said. "That's not too shabby!"

He said the housing and non-residential construction boom continues unabated, the retail sector has posted the second-highest sales increase in the country in four of the last five years, and the mining and oil and gas sectors are on a roll.

Crowflight Minerals Ltd. is one of the mining companies spending big bucks in the province this year.

Company president Mike Hoffman said it spent $36 million last year on construction of a new nickel mine and mill near Wabowden, and plans to spend another $55 million this year with the intention of having the mine up and running by the middle of the year.

Even the province's manufacturing sector has found a way to weather the storm created by a high-flying Canadian dollar, soaring energy costs, and an ongoing shortage of skilled workers.

Not only are manufacturers exporting more goods, but they continue to create new jobs.

While Statistics Canada predicts the sector will see a decline in overall capital expenditures this year -- $445.6 billion compared to $550.7 billion in 2006 -- spending on new machinery and equipment is expected to increase to $392 million from $386 million in 2006.

Ron Koslowsky, vice-president and general manager of the Manitoba division of the Canadian Manufacturers and Exporters, said manufacturers continue to invest in new equipment and new technologies because that's what they need to do to boost production, reduce operating costs, and maintain competitive prices.

And so far, it seems to be working.

"Companies keep saying business is good, sales are good, shipments are good, although profit margins are very tight," he said.

But whether things will stay that way if the U.S. economy slips into a recession is another matter, he said.
"They're still waiting for the shoe to drop, but so far so good."

Nationally, capital investment is expected to remain robust this year, outpacing 2007 growth.

Statistics Canada predicts total investment in construction and machinery and equipment will reach $339.5 billion, which would be a 5.2 per cent increase over 2007's total of $322.6 billion.

murray.mcneill@freepress.mb.ca

Capital Spending in Canada

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