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Economic News

Profits Edge Up, but the Pullback in Business Investment Remains Worrying

February 29, 2024
Florence Jean-Jacobs
Principal Economist


  • Profits of Canadian non-financial corporations increased for a second consecutive quarter in Q4, edging up 2.5% from Q3, despite weakness in the auto and oil manufacturing sectors. Due to declines in the first half of the year, businesses ended 2023 with lower profits than a year before on average (graph 1).

  • In Q4, net income before tax (NIBT) increased most in services, led by other wholesalers and telecommunication industries. Wood and paper manufacturers also saw their first increase in NIBT after six quarterly declines. These gains were offset by weakening profits for motor vehicle manufacturing due to production slowdowns for retooling and the US autoworkers’ strike, which had spillover effects in Canada. Auto manufacturing was the only industry to register negative net income in Q4. Profits of petroleum and coal producers also fell on the back of softer prices and temporary maintenance shutdowns at refineries.
  • Meanwhile non-residential business investment declined in Q4 for a second consecutive quarter. Business investment in non-residential structures and machinery and equipment fell 9.5% in annualized real terms. As in Q3, engineering structures and aircraft and other transportation equipment led the decline (table 1). All three major non-residential categories declined in real terms (structures, machinery and equipment, and intellectual property).


With Canada’s population growth rate at historic highs and business investment weakening, the per capita real business investment gap with the US continues to widen (graph 2). As we’ve highlighted before External link., this trend needs to be reversed to support long-term economic growth and to maintain competitiveness with our southern neighbour. Although productivity-enhancing investments may be less appealing to businesses in the current high interest rate environment, postponing these expenditures for too long will create more pain in the long term through lower growth.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.