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2015 the earliest for full production recovery

It’s going to take until 2015, at the earliest for many Canadian industries to hit pre-recession levels of production, says a Conference Board of Canada report.


August 25, 2011
by PLANT STAFF

OTTAWA: It’s going to take until 2015 – at the earliest – for many Canadian industries to hit pre-recession levels of production, says a Conference Board of Canada report.

The Ottawa-based research firm and the Business Development Bank of Canada (BDC) report in this summer’s Canadian Industrial Profile that only motor vehicle parts manufacturing and aerospace will achieve production levels by 2015 that exceed their 2007-08 output.

Published by The Conference Board of Canada, the Canadian Industrial service provides a five-year (2011-2015) production, revenue, cost and profitability forecast for six industries each quarter. The summer edition also covers manufacturing of furniture, paper and wood products, and printing services.

“Uncertainty is the watchword for all of these industries,” said Michael Burt, associate director, industrial economic trends at The Conference Board of Canada. “The current global economic turbulence increases the general risk to these industry outlooks. As well, industry specific factors are adding layers of concern.

Here are some highlights:

• Aerospace products. Production is expected to reach a low point in 2011 before output rises next year with the industry topping its 2008 peak by 2015. Demand is up for aircraft thanks to recovery in global passenger and airfreight but on the defence side, budget cuts in Western Europe and the US will trim slow growth. Demand for more fuel-efficient aircraft and the growing importance of emerging markets will generate more business opportunities.

• Motor vehicle parts. Supply disruptions resulting from the Japanese earthquake and tsunami continue to limit automotive production and demand for parts in 2011, but sales will surge over the next couple of years as market conditions in the US gradually improve. Production and profits are therefore expected to grow from 2012 through 2015, although mounting competition from countries with lower labour costs and the strong Canadian dollar will negatively affect cost-competitiveness.

• Wood products manufacturing industry. Struggles in the US housing market and slowdown in the Canadian market will reduce growth this year. Stronger growth is expected next year as North American markets rebound and the industry continues to make inroads into new export markets such as China. Still, production is unlikely to surpass a 2005 peak before the end of 2015.

• Paper products manufacturing. An increase in new orders and lower inventories suggests production of paper products will rise in the short term, resulting in the industry’s first yearly profit since 2002. However, a surplus of capacity limits the potential for price increases. Digital communications and media is also affecting paper demand, so future production growth will have to come from non-traditional markets or products.

• Furniture products. Exports have declined with a struggling US housing market and intense international competition. But a growing middle-class in countries such as China, India and Mexico offer new markets for high-end furnishings, leading to modest growth over the next four years that will be short of a return to peak levels.

• Printing services. Advertising and information transitioning from printed to digital formats will help flatten production and profits through 2015. Smaller print jobs using lower-cost technologies, such as digital printing, are the only growth areas.