Real GDP growth in Canada slowed down during 2015 with the drop in the price of oil and the crash in the resource sector. The economic contribution of the main resource producing provinces to Canada’s economic performance is particularly important when it comes to recent capital formation as an economic driver.
As a result of the crash in the resource sector, capital formation in Canada as a whole is taking a hit. As the accompanying figure from Focus Economics illustrates, capital formation growth in Canada for 2016 is going to be negative. Our performance with respect to capital formation is going to resemble Russia and Brazil more than the United States or Europe. Canada saw annual growth in gross fixed investment spending of 0.7 percent in 2014, -3.0 percent in 2015 and is expected to see -0.8 percent growth in 2016. Any pickup in business sector investment in other provinces sufficient to counter the drop out west does not seem to be happening yet.