Canadian Manufacturing

Business investment unlikely to hit pre-recession levels, says BoC

The Bank of Canada analysis predicts structural factors such as slowing population growth rates in advanced economies will continue to soften business investment


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OTTAWA—A new Bank of Canada analysis says it has doubts business investment in advanced economies will accelerate back to its level before the 2007-09 global financial crisis.

The discussion paper says it expects investment spending to see somewhat of a pickup from its lacklustre, post-2014 pace, which has been slowed by low commodity prices and heightened economic uncertainty.

But even as current headwinds fade, the authors predict structural factors such as slowing population growth rates in advanced economies will keep business investment from returning to levels seen before financial crisis a decade ago.

They write that commodity-producing economies enjoyed a brief investment-spending boom between 2010 and 2014 as the demand for resources rebounded and prices climbed.

But since then, the paper says business-investment projections have been consistently over-optimistic and have become a leading source of error in the Bank of Canada’s output forecasts for the United States and Canada.

Last month, the Bank of Canada pointed to the widespread uncertainty about the direction of U.S. trade policy as it downgraded its 2017 business-investment outlook.


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