Tomorrow, while your turkey’s roasting and your fresh pumpkin pie is baking, Canadian Finance Minister Jim Flaherty will deliver his regular update on the state of the domestic economy up north. As he’s stressed during the last couple weeks, Flaherty won’t be making any announcements about new spending plans designed to stimulate economic activity. Those plans will come with the 2008-09 federal budget, scheduled to be introduced in February.

His reticence on the matter of stimulus will disappoint many expert observers troubled by their perception that Canada is rapidly succumbing to the difficulties plaguing the global economy. It’s important to remember, however, that Canada entered this period of worldwide deterioration in a position of relative strength: Its books are balanced, its financial system is sound, and the natural resources that define its economy will be in high demand once we cycle out of this difficult phase.

There is also the issue of the Big Three US automakers, which have a significant presence in Canada. Prime Minister Stephen Harper has indicated a willingness to consider a bailout package, but only in concert with the incoming Obama administration. The Prime Minister and the Finance Minister are likely waiting for clarity from the US Congress and President-elect Obama on a course of action to preserve North American car manufacturing--how much in dollar terms Canada will commit to that significant source of jobs will impact the commitments that can be made to other recession-mitigating efforts such as infrastructure spending.

Harper and Flaherty have left no doubts, however, about their ultimate intentions. Stepping away from years of statements about fiscal and budgetary responsibility--including many unequivocal pronouncements during his recent successful federal campaign--Harper said in the immediate aftermath of the recently concluded G-20 summit in Washington, DC, that Canada would go into deficit for the first time in a decade if necessary to combat the effects of a slowing economy.

And during an early November meeting, prior to the G-20 summit, Harper and provincial leaders addressed the issue of Canada’s deteriorating physical infrastructure. A study on municipal infrastructure projects by Ottawa-based economics research firm Informetrica found that for each CAD1 billion in additional spending, 11,500 jobs would be added in the first year and the economy would expand by about 0.13 percent.

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Providing government support to aggregate demand is of obvious critical importance right now, but efforts to do so by spending money building schools, railways, hospitals, low-income housing, bridges and water mains has the added benefit of redressing decades of neglect by governments with other spending priorities. The infrastructure deficit in Canada is estimated to be CAD125 billion.

Accelerated infrastructure spending is one way for Canada to bolster its economy as the global slowdown begins to wear away at growth. Spending infrastructure dollars already in the federal pipeline could immunize, to a large extent, the domestic economy from recession. Because of administrative delays, the CAD8.8 billion federal Building Canada Fund (BCF), announced in the 2007 budget, has so far financed very few projects, leaving close to CAD3 billion in unspent federal money.

As stimuli go, no one can argue that focusing on infrastructure in both developed and emerging economies isn’t essential: Witness collapsed bridges in Minnesota, for example, or the sorry state of New Orleans’ levees. To make the spending pay off for the economy--to stimulate--it has to be directed at projects for which planning is completed. In Canada, there are hundreds of municipal infrastructure projects ready to go that can be financed from existing revenues once the construction season resumes next spring. And because the BCF is cost-shared between the federal, provincial and municipal governments, every dollar Ottawa invests leverages an additional two dollars from provinces and municipalities.

The Harper government has said it will wait until February--for the regularly scheduled tabling of the fiscal 2008-09 budget--to stimulate the economy with a new infrastructure spending package, above and beyond the CAD33 billion, seven-year infrastructure fund the minority Conservative government rolled out in the 2006 and 2007 budgets.

One name in particular in the Canadian Edge coverage universe stands to benefit from a renewed emphasis on infrastructure spending.

Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF) has provided building design and construction services primarily to institutional and industrial clients for more than 85 years. One of the better managed public construction companies out there, Bird has been consistently profitable over the last 20 years, making money through many business cycles.

That profitability record is founded on an effective risk-control strategy that includes getting firm pricing commitments from subcontractors before bidding on contracts and choosing clients carefully. It’s made money every year since 1988 and hasn’t incurred a quarterly loss since 1995.

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Growth prospects are supported by the recognition that Canada must address its aging infrastructure. On top of substantial opportunities on the institutional front, Bird is also benefiting from activity in the oil sands region in western Canada and the related infrastructure projects necessary to support it.  

For the nine months ended Sept. 30, Bird’s construction revenue increased by 48.3 percent to CAD788.6 million from CAD531.6 million, and net income rose by 108.5 percent to CAD46.3 million. Working capital ticked up to CAD73.2 million from CAD42.2 million a year ago and CAD49.8 million as of the end of 2007. Bird also affirmed regular cash distributions of CAD0.1209 per unit for the months of November 2008, December 2008 and January 2009.

Bird is well positioned to continue to benefit from its considerable exposure to government-funded projects as well as energy-sector spending in western Canada. As of Sept. 30, 2008, Bird’s backlog--an important indicator of a construction firm’s health--stood at CAD1.2 billion, up from CAD969.3 million at the end of 2007.

We’ll be taking a longer look at Bird and other companies well positioned to survive--and thrive--during and after the current market malaise lifts in the December issue of Canadian Edge, which will be published Friday, Dec. 5.