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Elevated Corporate Incomes Could Support Investment Ahead [2/2]

CANADA DATA
  • The still elevated nature of corporate pre-tax net incomes leaves scope for corporate investment as a potential (continued) growth engine.
  • Real private non-residential investment has been growing strongly, up 9.2% Y/Y in Q2 to add 0.5pps to real GDP growth although it has for some time been outweighed by the drag from residential investment (-14% Y/Y and -1pps in Q2).
  • Should this residential investment drag begin to fade along with the peak impulse from monetary policy tightening, overall business investment could swing to positive contributions.
  • Corporate net lending suggests there is still scope for increases in corporate investment: the net lending share may not be as high as it was earlier in the emergence of the pandemic but at 1.5% GDP it still has some room to be run down - see red line in the chart.

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