Bank of Canada governor Carney made a glaring omission before admonishing corporate Canada for hoarding cash – he forgot to check cash flow. Corporate investment in Canada continues to track cash flow generation and, in fact, capital investment by domestic companies is above normal levels.
If Governor Carney’s charges of cash hoarding were accurate, we would expect to see capital expenditure growth falling below cash flow. But since June 2012 the reverse is actually true. Canadian companies have continued to spend and invest while cash flow growth has declined.