It appears that the private sector has pushed the public sector out of the driver’s seat in terms of growth of capital spending.

According to Statistics Canada’s initial Survey of Public and Private Investment Intentions, growth of private sector investment (3.8%) is projected to outpace public sector spending (+1.6%) for the first time since 2006.

Across the major industrial categories, investment spending by manufacturers is projected to rise by 15.1% in manufacturing followed by 14.4% in transportation and warehousing, 9.4% in education services, 8.9% in wholesale trade and 7.4% in utilities.

By region, planned investment spending is higher in seven of the ten provinces led by Newfoundland (+27.2%), Saskatchewan (+7.2%), Alberta (+4.3%), and Quebec (+3.8%), while spending plans retreated in New Brunswick (-3.9%), in PEI (-3.4%) and Nova Scotia (-0.5%).

Based on the initial survey of investment intentions, growth in the total value of planned spending (+3.3%) is projected to be slow compared to 2010 (+10.3%) due to weaker growth of both public and private sector investment.

However, a number of factors suggest that a stronger than currently projected pace of private sector investment will help to offset the pronounced slowdown in public sector capital spending.

First, corporate profits increased by 7.9% in Q4/2010, their strongest quarterly gain since the final quarter of 2009.

Also, the very strong jump in fourth quarter GDP indicates the industrial operating rate also exhibited a solid rise in the fourth quarter.

Third, investor confidence as reflected by the S&P/TSX Index has increased by 25% over the past eight months and now stands within just 5% of its all time high.

According to the most recent Bank of Canada Survey of Loan Officers, business lending conditions have eased significantly and are now at their lowest (most accommodating) level since 1999.

Finally, based on the Bank of Canada Business Outlook Survey of Q4/2010, the net percentage of firms planning to increase spending on machinery and equipment over the next year remained very close to its ten-year high.

Although there are several significant risks to the outlook over the near term, including a double dip in U.S. growth and a major, global energy crisis triggered by escalating violence in North Africa, the near term outlook for investment in Canada appears very positive.