Modest profit gains ahead: Conference Board of Canada

OTTAWA: Another business index is showing increased business confidence in North America and manufacturing in particular gaining strength.

The Conference Board of Canada Leading Indicator of Industry Profitability has been showing profits moving sideways over the past year. However the indicator suggests corporate profitability in Canada will continue to post modest gains in the coming months.

The Ottawa-based research firm said business confidence is up in the second quarter thanks to increased optimism among business leaders while in the US consumer confidence is “gradually” improving with stronger job numbers. And manufacturing is showing signs of strength on both sides of the border.

The April indicator shows the profit outlook improving for electrical equipment, furniture, plastic and rubber products, and food and beverage manufacturing, but the index recorded a decline in paper products and clothing and textiles.

“Also of note, after several months of improvement, the profitability outlook for both the machinery and the motor vehicle manufacturing industries deteriorated in April. However, the weakness may prove temporary,’ said the Conference Board report, which also notes profits for commodities doing well.

“Prices for many metals – including copper, gold, and aluminum – are high. Crude oil prices have also been drifting higher in recent months,” said the Conference Board.

Few of the profitable industries are posting outsized gains, but the Conference Board said the near-term profit outlook remains positive, although the recovery remains fragile, given the variety of risks that businesses, consumers and governments are facing.