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.

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.

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. 

Third quarter earnings reports are in for virtually all the Canadian trusts and dividend-paying corporations tracked in our How They Rate table. Current payout ratios and other relevant information on the results are now reflected in the How They Rate.

Here’s the roundup of news from the CE coverage universe.

Harvest Energy Trust (TSX: HTE-U, NYSE: HTE) is putting off a planned CAD2 billion expansion of its Come by Chance refinery in Newfoundland. Harvest continues to look for a partner on the project, a difficult task given the state of the capital markets. The project would increase the capacity of the plant 39 percent to 190,000 barrels a day, enable it use lower-cost oil grades and convert its heavy-fuel-oil output into distillate fuel. Harvest will move forward with a CAD300 million project that includes upgrades to two refinery units over the next few years. Part of the project involves increasing the capacity of the plant’s sole crude unit to 120,000 barrels a day from 115,000, and raising the capacity of a hydrocracker to 42,000 barrels a day from 38,000. Harvest Energy Trust is a hold.

Huntington REIT (TSX: HNT-U, OTC: HURSF) has suspended its distribution. Sell Huntington REIT.

InnVest REIT (TSX: INN-U, OTC: ) cut its distribution by a third, from CAD0.09375 per unit to CAD0.0625; the new payout is effective with the November payment, payable Dec. 15 to unitholders of record Dec. 1. InnVest REIT remains a buy up to USD6.

Russel Metals (TSX: RUS, OTC: RUSMF) is acquiring Norton Metal Products, a family owned, US-based metals service center, for an undisclosed amount. The transaction is expected to close Nov. 28. Norton had annual revenues of approximately CAD70 million for the 12 months ended Sept. 30. Russel Metals is a buy up to USD20.

Energy Services

Cathedral Energy Services Income Trust (TSX: CET-U, OTC: CEUNF) boosted its 2008 and 2009 capital budgets. Cathedral plans to spend CAD51.4 million this year, up from an earlier approved budget of CAD39.9 million, and forecast 2009 spending at CAD17 million. Cathedral will add 20 Electro-Magnetic Measurement-While-Drilling (EM-MWD) systems, expand its mud motor and collar fleet to accommodate increased directional drilling capacity, add 11 production testing units, specialty wireline tools and acquire facilities. In 2009, Cathedral will upgrade its fleet of EM-MWD systems and add 11 more, plus seven production testing units for the US market. The company also has plans to expand operations in Venezuela. Cathedral Energy Services Income Trust is a buy up to USD10.

Information Technology

FP Newspapers Income Fund (TSX: FP-U, OTC: FPUNF) will pay a special distribution of CAD0.095 per unit relating to the suspended distribution for October 2008 and a monthly distribution of CAD0.095 per unit for November 2008 to unitholders of record on Nov. 28. The special distribution will be paid Dec. 10, the monthly distribution Dec. 30. Hold FP Newspapers Income Fund.

Financial Services

Bank of Nova Scotia (TSX: BNS, NYSE: BNS) will take charges of CAD595 after tax in the fourth quarter due to sliding markets and “unprecedented volatility.” Scotiabank said the charges relate to the September bankruptcy of Lehman Brothers, adjustments to the fair value of available-for-sale securities, mark-to-market losses on collateralized debt obligations, and charges for other derivatives. Based on about 992 million Scotiabank shares outstanding, the charges amount to CAD0.60 a share; the consensus earnings forecast for Scotiabank is CAD0.97 a share before one-off items. The bank will report quarterly results Dec. 2. Rating agency DBRS confirmed the bank’s AA credit rating and stable trends, saying that it views the writedowns as manageable, relative to the bank’s earnings ability and capital strength. Bank of Nova Scotia is a buy up to USD35.

Home Equity Income Fund (TSX: HEQ-U, OTC: HEITF) is cutting its distribution to CAD0.06 per unit, effective Nov. 30, to save cash in the wake of uncertain financial markets. At the end of September, Home Equity had about 7,000 reverse mortgages in its portfolio with a value of CAD798 million, secured by residential properties across Canada worth approximately of CAD2.2 billion. Hold Home Equity Income Fund.