November 17, 2008
Economic Snapshot — November 14, 2008
Weaker investment in Canada and Ontario bodes ill for future growth
In order for a country to grow and ultimately raise the overall standard of living of its inhabitants, it is essential that there be an increase in the stock of fixed capital assets.
Statistics Canada’s recent release of estimates of fixed assets indicates that. over the past 10 years, the value (in real terms) of Canada’s total fixed capital stock increased by 26.5%, just about twice the 13.8% increase it exhibited during the previous 10-year period.
By far, the major (46%) contributor to this significant increase in the country’s overall capital stock was the dramatic rise in capital spending in Alberta, largely caused by an 86% increase in spending on oil and gas extraction.
Although it was diluted by strong positive net migration, the value of fixed capital stock per capita in Alberta over the past 10 years increased by 42.3%, from $73,786 to $105,013.
For the country as a whole, over the same time frame, the value of fixed capital stock per capita increased by 14.7%, from $43,428 to $49,934.
Other provinces that saw significant increases in the value of fixed assets per capita between 1998 and 2008 were Prince Edward Island (+20.7%), New Brunswick (+18.7%), Newfoundland (+17.2%) and Saskatchewan (+15.9%).
One of the more disturbing developments over the past 10 years is the fact that, on a per capita basis, the net (after depreciation) value of fixed capital in Ontario has increased by a mere 3.9%, from $40,127 to $41,680. By comparison, the value of per capita fixed capital assets increased by 6.4% in Québec, by 10.7% in British Columbia and by 13.4% in Nova Scotia.
It seems likely that Ontario will hang onto its recently won “have not” provincial status for the foreseeable future for two reasons: (1) the province has invested at a considerably slower pace than has the rest of the country over the past 10 years; and (2) it shows little inclination toward altering its relatively hostile investment climate.
John Clinkard has over 30 years experience as an Economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Growth of Fixed Capital Assets Per Capita – Canada and Provinces 1998 to 2008
Data source: Statistics Canada/Chart: Reed Construction Data – CanaData.
