Canada: Investment to address capacity constrains offsets NAFTA uncertainties - NBF

According to National Bank of Canada’s analyst Krishen Rangasamy, tight capacity utilization in several sectors in Canada is pushing up investment, much in line with historic norms. 

Key Quotes:

“According to Statistics Canada, the industrial capacity utilization rate ─ ratio of actual output to estimated potential output ─ jumped to an 11-year high of 85.5% in the second quarter of 2018. Capacity utilization rates in sectors such as construction (28-year high), oil & gas (19-year high) and forestry are now higher than the averages prevailing just before the Great recession of 2008-2009. Tight industrial capacity has historically led to a ramp up in business investment spending.”

“That relationship continued to hold in the second quarter despite uncertainties brought by ongoing trade negotiations. While some firms are reportedly putting off investment decisions amidst NAFTA related uncertainties, others seem to be providing an offset by plowing ahead with outlays to address capacity constraints.”