Even if sales perk up in July this sector is still on track to contract for the fourth consecutive quarter, said Stephen Brown and Olivia Cross of Capital Economics.
Manufacturing capacity utilization remains lower than before the pandemic, āso even if borrowing costs fall further, firms seem to have little incentive to invest, the economists said.
The bank said businesses are increasingly spending money on upkeep and repair rather than expansion or improving productivity because of high interest rates, weak demand and economic uncertainty.
āUntil more businesses reach or exceed optimal capacity, there may not be a strong incentive for manufacturers to expand their facilities or add to existing machinery and equipment,ā it said.
There was more bad news in the construction sector.
Building permits fell 14 per cent in June from the month before, with non-residential permits dropping 18 per cent to their lowest level since the pandemic.
āCommercial, industrial and institutional & government permit issuance are now all down markedly from their earlier post-pandemic highs,ā said Brown and Cross.
Both manufacturing and construction declines āsuggest that business investment will continue to weaken and present downside risks to the Bankās GDP forecast,ā they said.
Canadaās āfragileā economy remains vulnerable to several risks that could plunge it into recession, according to Moodyās Analyticsā latest assessment, and the risk of a weakening labour market is rising.
If interest rates remain higher for longer, businesses may cut staff, which in turn weakens consumer demand and triggers more layoffs, said the report.
And if thatās not enough, businesses are bracing for billions of dollars in losses if the countryās two national railways shut down this week.
āThe economic harm will extend well beyond the $1 billion of goods that are transported by rail each day,ā Goldy Hyder, chief executive of the Business Council of Canada, told Bloomberg.
āIt will lead to billions more in lost revenue from goods that wonāt be sold, lost wages of workers who wonāt be able to do their jobs and the potential for lost contracts from international shippers and consumers.ā
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Power-hungry data centres that run AI and cryptocurrency mining are now gobbling up two per cent of global electricity use and their footprint is growing, says research by the International Monetary Fund.
To put that number in perspective, creating one bitcoin requires roughly the same amount of electricity as an average person in Ghana or Pakistan would consume in three years.
A question posed to AI program ChatGPT takes 10 times the electricity needed for a Google search.
The IMF calculates that electricity use of both data centres and crypto mining could climb to 3.5 per cent of the global total within three years. That would be as much as Japan, the worldās fifth largest electricity user, is using now.
āThe climate impact of these activities ā irrespective of their social and economic benefits ā is cause for concern,ā said the IMF.
Estimates put their carbon emissions at 1.2 per cent of the worldās total by 2027.
Canadians get the latest reading on inflation today when Statistics Canada releases the consumer price index for July.
Earnings: Loweās Cos Inc, Medtronic PLC, Keysight Technologies Inc.
One of the oldest investing adages is that āreal estate is local,ā which emphasizes that markets vary significantly across different geographies and jurisdictions. Veteran investor David Kaufman says thatās why itās important to look behind the headline numbers. Find out more.
Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you wondering how to make ends meet? Drop us a line with your contact info and the gist of your problem and weāll try to find some experts to help you out, while writing a Family Finance story about it (weāll keep your name out of it, of course). If you have a simpler question, the crack team at FP Answers, led by Julie Cazzin, can give it a shot.
McLister on mortgages
Want to learn more about mortgages? Mortgage strategist Robert McListerās Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you wonāt want to miss. Plus check his mortgage rate page for Canadaās lowest national mortgage rates, updated daily.
Todayās Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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