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Capital investment in Canada is expected to remain robust this year, exceeding even the pace of growth of 2007.

Total investment in non-residential construction and machinery and equipment is expected to reach $250.1 billion, up 6.8% from 2007, according to a sample survey of 28,000 businesses and governments. This increase will be higher than the 4.7% gain in 2007.

Of the total, $129.2 billion is earmarked for non-residential construction, a 7.9% increase, while $120.9 billion is planned for investment in machinery and equipment, a 5.7% gain.

World-wide demand for Canada's natural resources and raw materials is keeping prices high and fuelling capital spending in the primary sector and the related downstream industries. The biggest gains in investment are projected to occur in the oil and gas extraction sector, transportation sector, such as pipelines, and electricity generation.

The public sector accounts for slightly above one-quarter ($68.6 billion) of the $250.1 billion in total investment intentions. Investment in the public sector is expected to increase 11.8% from 2007, more than twice the rate of growth of 5.1% in the private sector.

At the same time, Canada's housing market is expected to remain virtually stable. Investment this year is forecast at just over $89.3 billion, up only 1.0% from 2007. This compares with an 8.3% increase in 2007.

Total capital investment including housing, non-residential construction and machinery and equipment is expected to rise by $16.9 billion to an estimated $339.5 billion in 2008. This represents a gain of 5.2% compared with 2007.

Rebound for mining and oil and gas extraction sector

Survey data show that investment intentions in the mining and oil and gas extraction sector would hit $56.4 billion in 2008, a 4.3% gain from last year. This will be a turnaround from a 6.4% decline in 2007.

Accelerating demand for Canada's natural resources has propelled world commodity prices to unprecedented levels.

Investment in non-conventional oil and gas extraction, primarily the Alberta oil sands, is expected to hit $19.7 billion, a 23.0% increase from 2007.

On the mining side, investment intentions also shows strong growth. Spending is anticipated to increase 12.2% to $7.1 billion in 2008. The vast majority of this growth is attributable to mining in metal ores.

Investment in the nickel-copper industry is expected to hit $1.3 billion and in the copper-zinc industry, $986.3 million.

Back-to-back gains in transportation sector

The transportation and warehousing sector is expected to reap benefits from the gains in the oil and gas industry, especially in the area of pipelines.

Companies estimated their total investment this year at just over $23.1 billion, up 23.3% from 2007. This would come on the heels of a 29.1% jump in 2007.

Investment in pipelines is anticipated to hit $6.0 billion, three times the level of $2.0 billion in 2006.

Similarly, investment in the transit and ground passenger transportation industry, which is mainly under the authority of the public sector, is expected to reach $4.5 billion this year, nearly twice the level in 2006. Combined, these two industries account for an added investment totalling $4.8 billion this year.

Manufacturing: primary metals and petroleum refinery lead a turnaround

Manufacturing enterprises showed some optimism in their investment intentions despite the toll on the sector taken by the gain in value of the Canadian dollar and record crude oil prices.

Enterprises estimated their investment at just over $19.7 billion this year, up 7.6%. This would follow a 5.5% decline in 2007.

In 2007, only 6 of 20 industries in the manufacturing sector show increases in capital investments. For 2008, 11 of 20 industries, led by primary metal manufacturing and petroleum and coal products, anticipate investment increases. Combined, those two industries are expected to invest an additional $1.3 billion for a total of $5.1 billion this year.

Firms in the primary metal manufacturing area estimated that their capital spending will hit $2.2 billion, up 50.3%.

In the petroleum and coal products manufacturing area, capital spending is estimated at $2.8 billion, up 25.6%.

Utilities: Electric power turning green

In the utilities sector, growth in total investment is anticipated to surpass the national growth of 6.8% this year. However, this will be a marked deceleration from 2007.

Utilities anticipate capital spending amounting to nearly $21.3 billion this year, up 8.0%. In contrast, investment the year before rose 23.8% when large projects were initiated.

Within the sector, however, companies that generate, transmit and distribute electric power anticipate 12.6% growth in capital spending in 2008. Investment in non-residential construction will rise 13.3%, while investment in new machinery and equipment will increase 11.1%.

Overall, the growth in this industry mirrors two factors — the need to expand capacity, as well as the need for alternative power generation with lower environmental impact and more efficient technologies, such as wind power generation.

Strong growth in real estate capital investment

Capital investment in the real estate and rental and leasing sector is projected to increase for the sixth consecutive year in 2008. Companies anticipate total investment of just over $19.3 billion, up 8.2% from 2007.

The largest contributor to this increase is the lessors of real estate industry, where capital investment is anticipated to reach more than $6.8 billion, a gain of 23.6% or $1.3 billion from 2007.

Public administration investment leads investment growth

Capital spending by public administration, that is all three levels of government, will account for nearly one-half (48.5%) of the total public sector spending, an estimated $33.3 billion.

The total investment for this sector will increase 14.7% from 2007 compared with an average annual growth rate of 12.0% during the past five years.

Of the $33.3 billion total investment, the federal government accounts for 14.2%, the provinces and territories, 34.8%, and local municipal and regional governments, 51.0%.

Capital investment by the federal government will increase at a rate slightly above the national average (+6.8%) with 8.3% growth in 2008 to reach $4.7 billion. Spending by the provinces and territories will increase 23.3% to $11.6 billion, and spending by local administrations will rise 11.3% to about $17.0 billion.

Combined, the $3.9 billion of investments by provincial, territorial and local public administrations will account for almost all new spending in public administration.

Provinces and territories: Decline in private and public investment only in Northwest Territories

Public and private investment intentions are expected to increase in all provinces and territories in 2008 except the Northwest Territories, where a decline of 17.4% is anticipated due to project completions in the mining sector.

The biggest gains are anticipated in Manitoba (+18.8%) and Saskatchewan (+18.0%).

In terms of absolute dollars, however, the largest increase will be in Quebec. Investment there is anticipated to increase by more than $4.0 billion, which represents 23.9% of the increase in total investment nationally in 2008.

Growth in public administration investment is driving increases in both Quebec and Ontario with an additional $1.7 billion and $1.1 billion respectively.

The oil and gas extraction sector will be the largest contributor to the growth in capital investment in two provinces: Newfoundland and Labrador and British Columbia. In absolute dollars, this sector will generate an additional investment of about $508.7 million in Newfoundland and Labrador, and $1.3 billion in British Columbia.

In Manitoba, Saskatchewan and Alberta, the gains are driven by new investment in the transportation and warehousing sector. Alberta also benefits from its real estate industry, mainly because of the high demand for office space, which will generate 35.4% of the total investment increase in the province.