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Business investment propels the Canadian economy in Q2

Published by Stephanie Brooks on August 31, 2012

The two per cent annual growth rate the Canadian economy recorded in the second quarter of 2012 confirms businesses are investing and playing their part in driving the economy forward, according to Canadian Manufacturers & Exporters (CME) President & CEO, Jayson Myers.

Data released today by Statistics Canada shows capital investment on the part of Canadian businesses was the most important contributor to economic growth.

"These results clearly underline the importance of business investment in sustaining economic growth in Canada," says Myers. "They also show that recent concerns around businesses preferring to hold cash, instead of investing in new technologies and facilities, are greatly exaggerated."

In fact, business investment in non-residential construction activity increased at an annual rate of 11.2 per cent, and capital expenditures on new machinery and equipment were up by 7.4 per cent in the second quarter of the year.

In contrast, consumer spending rose by an annualized 1.2 per cent and export sales were up by 0.4 per cent in the quarter. However, Myers warns businesses will find it difficult to maintain profits and strong investment growth if customer demand weakens much more within Canada or around the world.

"The first sign of trouble would be if businesses begin to run down their cash reserves. It would be a sure indication of faltering sales and lower long-term revenue projections," he notes. "Luckily, there is no indication of that in the second half of the year."

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