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As it regularly does at the end of February, Statistics Â鶹´«Ã½Ó³»­ released the results of its latest survey of (a.k.a., the CAPEX survey). After initially planning to increase their total capital expenditures on non-residential tangible capital assets by +4.3% in the 2023 survey, the 2024 survey reported businesses and governments ended up boosting their spending by +8.2%. This upward revision was due in large part to a higher than previously estimated increase (+13.9%) in mining, quarrying, and oil and gas extraction.

The +8.2% figure for Â鶹´«Ã½Ó³»­ as a whole in 2023 will moderate to +4.5% in 2024. In 2024, Capex will accelerate in four of the ten provinces led by Nova Scotia (from +11.9% in 2023 to +15.5% this year), Manitoba (from +5.1% to +8.2%) Ontario (from +8.5% to +9.3%), and Quebec (from 8.4% to +8.8%.) The pace of additional spending will slow in three provinces: Saskatchewan (from +25.9% to +14.4%), Prince Edward Island (from +16.0% to +7.2%), and Newfoundland and Labrador (from +27.0% to +6.5%). And it will decline in three provinces: British Columbia (from +12.9% to -5.3%), New Brunswick (from +1.4% to -1.7%), and Alberta (shrinking further, -1.1% to -0.9%).

Rebound in corporate profits and investor confidence

This year, private sector capital spending is projected to increase by +5.0% following a nominal gain of +4.3% in 2023. It is worth noting that, based on the recently released national accounts, in real terms, business non-residential Â鶹´«Ã½Ó³»­ contracted by -0.7 % in 2023 following an increase of +4.0% in 2022.Ìý

Although the increase in 2024 investment intentions is relatively modest, it is consistent with the rebound in third-quarter corporate profits (following three consecutive declines). It also coincides with the improvement in investor confidence reflected by the steady rise in the S&P/TSX Composite Index since October of 2023, as well as with the pick-up in the Bank of Â鶹´«Ã½Ó³»­â€™s most recent take on the outlook for investment in machinery and equipment, reported in the .Ìý

Across the country, capital spending on nonresidential Â鶹´«Ã½Ó³»­ will exhibit its strongest gains, 2024/2023, in Saskatchewan (+21.1%), Prince Edward Island (+18.9%), Ontario (+8.5%), and Quebec (+8.3%).Ìý

Government initiatives to drive CAPEX

Across industries, by far the largest contributor to the increase in CAPEX in 2024 will be manufacturing. After a gain of +5.4% in 2023, spending on manufacturing projects is projected to jump by +31.0%, accounting for an estimated 56% share of the total increase in capital and repair expenditures nation-wide in 2024.

This increase is underpinned by federal and provincial government-supported programs intended to incentivize clean energy programs. These include seven new renewable diesel facilities related to the federal government’s 2020 Clean Fuel Regulations as well as $27 billion in new investment attracted to Ontario by the provincial government.

In addition, Dow Chemical plans to spend $11 billion to build a net-zero emissions ethylene facility in Alberta.Ìý Other industries announcing significant increases in capital spending include utilities (+24%), oil and gas extraction (+21%), and federal government public administration (+24.6%).Ìý

Outlook for CAPEX brightens into 2025

From our perspective, the outlook for non-residential capital spending a year further out, in 2025, appears brighter than it is in 2024 for a couple of reasons. First, the steady retreat in headline inflation sets the stage for the Bank of Â鶹´«Ã½Ó³»­ to begin to start easing monetary policy mid-way through the current year.

Second, investor confidence, reflected by the S&P/TSX Composite Index has been trending steadily higher since mid-way through the fourth quarter of 2023.