Prospects in 2009 look pretty grim, even for the commodity-rich Western Canada. The per-barrel price of oil is dropping, with some analysts predicting a dip to as low as $60 if economic conditions worsen. That would let some of the air out of oil sands development.
Of particular concern are the volatility of the currency, plunging to 77 cents before rebounding to between 80 to 90 cents; and tight credit conditions—both presenting significant challenges to business investment.
Not surprisingly, industry is looking to the federal government for some help through this rough patch to keep plants afloat and people employed. If the Harper government is serious about being the steady hand guiding the economy, it must act swiftly to ensure Canada’s industrial engine doesn’t sputter to a halt.
Despite all the challenges they face, manufacturers were still cautiously optimistic about the year ahead when Canadian Manufacturers & Exporters fielded its annual Management Issues Survey (MIS) in late August/early September. That was before credit went into a worldwide meltdown and the free world’s financial underpinnings began to teeter. They feel differently now.
In September, most were not expecting sales and exports to grow. Declines this year were expected by 25% of the respondents and next year by 15 per cent. After the global cataclysm, the CME did a mini-poll in October of 300 manufacturers looking six months out, and 50% were expecting orders to fall this year while just 10% are looking at an increase.
Weaker sales and profits are impacting investment plans. Only 29% anticipate increased investments in machinery and equipment this year and 28% next year, down considerably from last year’s results.
If the Harper government is looking for suggestions to keep industry on track, the 43 members of the Canadian Manufacturing Coalition have some recommendations. They’re calling on the feds—which moved quickly to help the banks—to provide temporary loan guarantees and lines of credit to firms, allowing them to maintain their businesses and avoid layoffs. They also want more proactive lending and financial support from the Business Development Bank and Export Development Canada, both agencies of the federal government. And they are repeating a request for government to invest in infrastructure, extend the two-year depreciation on purchases of new equipment by at least five more years, make research and development tax credits refundable and introduce a new tax credit for the cost of training workers.