Key industries waiting on customers for full recovery
Canadian manufacturers in key industry sectors are waiting for their customers to fully recover from the recession before consistent growth will occur, says a Conference Board of Canada report.
OTTAWA: Canadian manufacturers in key industry sectors are waiting for their customers – other manufacturers and construction companies – to fully recover from the recession before consistent growth will occur, says a report from the Conference Board of Canada.
The Ottawa-based research firm’s Winter 2011 edition of the Canadian Industrial Profile Service report, produced in collaboration with the federal Business Development Bank of Canada (BDC), looks at production, employment, revenues, costs and profitability of five industry sectors over a five-year period.
“The recession ended more than a year ago, but the global recovery has been slow. As such, in terms of production, profitability and employment, it will take several years for most of these industries to recover fully from the effects of the recession,” said Michael Burt, associate director of industrial economic trends for the Conference Board of Canada.
• Chemicals: the report notes the toll a rising Canadian dollar has had on the industry, even before the recession. Since manufacturers are still recovering from the effects of the recession, chemical industry profits are expected to decline to about $2.1 billion this year from almost $3 billion in 2008, and will remain limited in future years.
• Computer and electronic products is recovering production and jobs, says the report. Production will increase this year for the first time since 2006, and the industry should recover all of the jobs it lost during the recession by the end of the year. But the report cautions prices will be prevented from any big increases by fierce international competition. Profits of $1.7 billion are expected this year, slightly ahead of last year.
• Non-metallic mineral products, such as glass and cement, are dependent on the ups and downs of the construction industry. The report views construction prospects to be positive but residential building will occur at a weaker pace than non-residential. Profits will stabilize at $1.5 billion for the next few years.
• Plastic and rubber products are tied to the construction industry and transportation equipment manufacturers. The report notes employment in this sector has fallen by almost 50,000 jobs since 2005. To arrest a decline in sales that began in 2006, it says a rebound in US vehicle sales is crucial. Profits, projected to be $787 million this year, will not return to 2007 levels until next year.
• Pharmaceuticals are supported by demand from an aging population, although the report notes exports slowed last year and R&D funding diminished when access to credit tightened. Restraint from governments and price competition from generics and emerging markets will limit profit growth. Profits are projected to be $836 million this year, slightly higher than in 2010.
The Canadian Industrial Profile Service is part of The Conference Board of Canada’s Industrial Economic Trends research. Outlooks for 23 industries are completed each year. Click here for information.