(Bloomberg) -- Foreign direct investment into Canada remained steady in the third quarter, an encouraging sign that businesses continued to park capital in the northern nation even as uncertainty mounted ahead of the US election.
FDI totaled C$27.1 billion ($19.3 billion) in the three months between July and September, Statistics Canada reported Thursday from Ottawa, driven by merger and acquisition activity and investment into the manufacturing sector.
It does mark a decrease from the C$41.6 billion inflow in the second quarter, a record pushed by manufacturing, energy and mining outlays. Royal Bank of Canada’s acquisition of HSBC Holdings Plc’s Canadian division caused FDI to drop in the first quarter, but over the past year investment from abroad totaled C$58.4 billion — just above the decade’s historical average.
The report may be read as a hopeful signal for investment flows into Canada, but Donald Trump’s election is now adding to uncertainty. The president-elect has threatened 25% tariffs on the northern nation and pledged lower taxes in the US, raising grave questions about Canada as a destination for capital.
The data also reinforce the risks stemming from the deeply interconnected investment flows between the US and Canada, said Shelly Kaushik, an economist with the Bank of Montreal.
“The US continues to be the largest source (and destination) of foreign investment into (and out of) Canada, highlighting the cross-border vulnerability to trade protectionism,” she said.
The most recent iteration of the Bank of Canada’s business outlook survey showed economic growth, US and Canada elections, cost pressures, tax policy and regulation among the top issues that were causing uncertainty in the third quarter.
--With assistance from Jay Zhao-Murray.
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