Value of machinery and equipment

Private investment in equipment and machinery traditionally moves in line with overall GDP. During boom times, corporate profit is typically elevated, which enables companies to spend more on new equipment. When profit shrinks during recessions, companies invest less and banks are less willing to lend for larger investments, such as agricultural or mining equipment and machinery. The recession of 2008 and 2009 was no exception, as investment in industrial equipment and machinery plummeted 19.1% in 2009. Investment recovered after, however a steep decline in commodity prices between late 2014 and 2016 hit Canadian oil producers hard, leading investment in machinery and equipment to fall 6.8% in 2015 and 9.9% in 2016.

Despite rebounding in 2017 and 2018, investment in machinery and equipment declined 13.4% in 2020 due to the pandemic. Furthermore, global oversupply of oil, coupled with reduced global demand, led to reductions in capital outlays from energy producers, further affecting machinery and equipment investment. Despite the long recovery process starting in 2020 Q3, as some business activity resumed, output remained below pre-pandemic trend and continued to remain so for an extended period of time. While business investments recovered in 2021, the need for new capacity remained lower than pre-pandemic levels. Similar to the United States, Canada has struggled with labor shortages across a variety of industries, while manufacturing output has been affected by lingering supply-chain inefficiencies, surging inflation and the global effects of the Ukraine war. As a result, due to a steady rebound following the pandemic period, investment in machinery and equipment growth is expected rise at an annualized rate of 1.8% to reach a value of $89.2 billion over the five years to 2025.