Declining corporate profits, record low levels of capacity utilization, and a restrictive lending environment stemming from the global downturn have caused Canadian firms to scale back their investment plans significantly over the past six months.

Based on the latest (June 09) Capital Spending Survey, investment intentions in non-residential construction and machinery and equipment for 2009 now total $227.9 billion.

This is 4.1% lower than the previous estimate of 2009 spending, and indicates that total non-residential capital spending in the current year will be 10.5% lower than it was in 2008.

According to Statistics Canada, three quarters of the 20 industries surveyed scaled back on their spending plans, particularly firms in mining and the oil and gas sector, which now expect to cut their 2009 capital spending by 32.9%. This is considerably greater than the 26.4% reduction they expected at the beginning of the year.

Other sectors that have significantly scaled down their 2009 investment plans include finance and insurance (from -7.5% to -24.1%), manufacturing (from -8.5% to -20.5%) and wholesale trade (from -0.3% to -20.4%).

While private sector investment plans have shrunk over the past six months, spending plans in the public sector have increased, led by public administrations which now plan to boost their spending by 14.8% in 2009, up from 10.5% in 2008, as mentioned above.

In addition, planned investment by health care providers is up from 0.5% to 7.1%, and education services now plan to increase spending by 5.5%, up from a decline of -1%.

Regionally, the largest downward revisions to 2009 investment intentions occurred in New Brunswick (from -11.4% to 28.5%), followed by British Columbia (from -9.8% to -20%), Quebec (-0.4% to -9.5%) and Nova Scotia (from (+6.7% to -0.2%).

In Newfoundland, investment intentions strengthened at mid year, increasing from +12.7% to 23.7%, as was the case in Saskatchewan where investment spending was revised up from 2.3% to 3.2%.