THE BOTTOM LINE
One of the key metrics in tracking the state of the provincial
economy is not one you’d expect. It’s not oil
prices or potash volumes. Not even grain production.
The real indicator is investment.
When Saskatchewan went through the decade-long boom starting
in 2004, it was investment that was the key driver. Billions in
fresh capital flowed into the province to fund expansion or construction
of new potash mines. Money poured into the oil patch.
Even more was devoted to constructing commercial and retail
properties to support those servicing all that growth or to meet the
needs of a population base that was growing by 15 per cent.
Here’s the nuance of this angle.
Traditionally we look at economic growth through the lens of
income. Potash volume multiplied by price equals income. Grain
production multiplied by price is price. Oil output is measured in
volume or dollar terms. Again, an income measure.
In the business context, these turn up on the income statement.
Investment is different because it is recorded on the balance sheet;
it’s more permanent.
Oil or potash or grain prices fluctuate daily. Investment is fixed.
Once you build a mine, it’s part of your asset base; you don’t “unbuild”
Business or commercial operators are most likely to appreciate
this difference as they deal with it every day in their own enterprises.
So, when investment figures come out, we pay attention.
StatsCan releases these figures once a year, usually on Feb. 28.
They survey hundreds of major organizations and ask them what
BY PAUL MARTIN, MARTIN CHARLTON COMMUNICATIONS
they spent last year and what they plan to spend this year. Those
numbers are out and are relatively flat.
Before we dig into that, here’s a little history.
Prior to SaskaBoom, annual investment in the province was $7
billion. The chart was flat, we could count on it. Back then we described
the provincial economy as boringly stable. Then came 2004
and investment began to rise, largely the result of the emergence of a
middle class in China who began to demand an improved diet with
more protein. Canadian farmers and fertilizer suppliers responded
to that new demand by investing in new mines and cropping options
such as pulses.
Investment poured into the province to meet that emerging
demand. Before long, capital flows for plant, equipment, technology
and repairs grew, ultimately reaching $20 billion a year;
above the level we had been accustomed to seeing. Little wonder
Saskatchewan was booming.
The flow peaked a few years ago and has been seeking a
According to StatsCan, the non-residential construction segment
of that total will exceed $10 billion this year. It is the fourth year in a
row that we hit that level.
Basically, investment in construction – including infrastructure
– is holding its own, even in the face of headwinds on fronts ranging
from trade policy to political interference in commercial activity
such as canola exports. The headlines may be bleak, but when you
dig into the numbers, the key indicator of investment flows is anything
48 Think BIG | Quarter 2 2019 | saskheavy.ca