Stunning charts of how investment in industrial machinery & equipment collapsed a decade ago in Canada but stayed on track in the US.
By Wolf Richter for WOLF STREET.
“According to the latest national accounts data, real investment in industrial machinery & equipment [in Canada] fell in Q2 to its lowest level on record (data back to 1981). As today’s Hot Chart shows, the divergence with the U.S. is nothing short of appalling,” wrote Stéfane Marion and Matthieu Arseneau, at Economics and Strategy, National Bank of Canada, in a note sent to subscribers today.
“How did we get here? Years of excessive regulation, and a chronic lack of ambition by successive governments in promoting domestic transformation of our natural resources—recently made worse by Washington’s protectionist agenda,” they wrote.
Their note included this stunning chart of investment in industrial machinery and equipment in the US and in Canada. Investment in both countries had roughly tracked on a similar trend in for decades through 2012, and then the bottom fell out in Canada, while investment in the US continued roughly along trend.
The analysts wrote in their note: “We’ve written about the plight of Canada’s industrial sector [here, here, and here].” The first of their linked reports includes these two charts:
Private nonresidential investment, inflation adjusted:
Net capital stock in manufacturing, inflation adjusted:
In their note today, the analysts wrote:
“That failure has eroded Canada’s manufacturing base and left us at risk of becoming irrelevant in global supply chains. To Ottawa’s credit, the pledge to quickly ramp up military spending to 3.5%–5% of GDP could help catalyze a reindustrialization. But time is of the essence—if we are to salvage what’s left of the sector.
“What Canada needs is a wartime multi-pronged strategy that ends the dithering: a competitive tax regime, a sweeping reduction in red tape, and clear laws on how we intend to develop our natural resources. Clarence Decatur Howe—the architect of Canadian industrialization—showed what determined leadership can achieve. Canada must now draw on that inspiration to rebuild its industrial base before it’s too late.”
But Canada sure knows who to invest in, push, promote, subsidize, and build a housing bubble that ranks among the world’s most splendid, if not the most splendid, that not even the Financial Crisis could slow for more than a couple of quarters, but that has now run into trouble, at least in Greater Toronto:
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Can you do the same with WTO entry, GFC, QE, and US vs China manufacturing? My guess is the charts are similar.
Canada went all in on inflating assets, shifting green, pumping housing prices, and importing goods—essentially financializing its economy vs the USA.
Isn’t this the same as what the US has done compared with China?
“Isn’t this the same as what the US has done compared with China?”
yes, the US looks pretty good in that regard compared to Canada, but abysmal compared to China.
Can-adians have become Can’t-adians? Just call 1-800-Mex-I-Can for a bit of help.
We will see if Mark Carney has the right stuff to redirect the Canadian economy, certainly his predecessor did not, but the problem goes back further than the term of his predecessor. Plus Carney has a history of supporting his predecessor’s policies. He calls himself a pragmatist, but his track record is much more that of a controlling ideologue. It is complicated. A lamentable situation, for sure.
Ohhhhh Canada…Let me hear you sing…
Go Woke and Go Broke. It’s that simple.
Excuse me, it’s my right to spend $15 on ginger turmeric kombucha with government-subsidized income assistance while I study gender science at a government-subsidized university. Don’t you understand that I’m investing in ME? /s
Maybe when Trump finishes his presidency, he can become Prime Minister of Canada and Make Canada Great Again.
This comment is amazing
Oh! Made me laugh!
Read this recently: “ At 6.4 per cent of GDP, the U.S. fiscal deficit is four times Canada’s in proportionate terms and is on track to get worse.” (Toronto Globe & Mail)
Anyhow, a recession is looking more likely than not for both Canada and the US, and the question is whether or not in this new debt-ridden environment, with Canadian real estate in a huge bubble, our “safe” Banks will hold up.
It was the RADICAL LEFTLEANING LIBERALS under TRUDEAU who were the architets of Canadas Decline .. just as was the case in EUROPE