More than energy
Manufacturing needs to kick into a higher gear to lessen the impact of energy’s ups and downs.
Oil & Gas
bank of canada
School of Public Policy
University of Calgary
Canada gets a healthy economic boost from Alberta’s energy sector, but we need more than one basket for the eggs.
How much of an impact does Alberta’s energy resources have on Canada’s prosperity? CBC News asked the School of Public Policy at the University of Calgary to create a “what if” scenario, the premise being Alberta’s job market, with the highest growth of all provinces, matching Ontario’s rate. Since 1995, employment has grown by an average 2.5% each year, well ahead of Ontario’s 1.44%. In August, Canada’s unemployment rate was just under 7.2%.
In the parallel universe created by the School of Public Policy, the unemployement rate would be more like 9.39%, or 411,000 fewer jobs this year, which by any accounting, is quite an impact.
Here’s a potentially real scenario. World oil prices have been falling, and if they remain low, the energy boom will slow, which will have a corresponding effect on the Canadian economy.
Manufacturing, particularly the non-energy related kind, needs to kick into a higher gear to lessen the impact of energy’s ups and downs.
Conditions are promising. The loonie is floating below the US dollar and is expected to do so, possibly for some time. American manufacturing is surging; and the Bank of Canada is forecasting growth of 2.5% in 2015, then 2% in 2016. Meanwhile, the federal government has been securing trade deals that will provide expanded and new markets for Canadian products.
But manufacturers, most of them small and fatigued by the effects of the 2008-09 recession and unsteady world conditions of the past few years, appear to be risk averse.
PLANT’s 2015 Manufacturers’ Outlook survey of a mostly “cautiously optimistic” group of senior executives, found they continue to focus on domestic and US markets.
More than 90% of the 416 respondents derive most of their business from trade in North America (63.1% in Canada). Over the next three years, about 83% will seek new markets within the home continent, and from there the numbers take a mighty tumble. China is a huge opportunity, not without some risk, and so far just 2% of the respondents are doing business there.
The federal government is wrapping up trade deals with the European Union and South Korea, and negotiating the Trans-Pacific Partnership with a number of countries, all representing expansion into global markets that should translate into growth and jobs. However, only 11% of the Outlook respondents appear to be excited by the opportunities.
Of course, Canadian companies must be prepared to compete. But the Bank of Canada warned earlier this year that Canada is missing out on $40 billion in export sales and will continue to do so because of lagging productivity that’s costing companies market share.
Manufacturers have access to technology that will boost the productivity of their operations, yet the survey reveals most are not making use of it to monitor and measure shop floor manufacturing equipment and operations. Fifty-one per cent are still using manual methods to collect, analyze and review data compared to 31% who use automated means. Seventeen per cent aren’t doing any monitoring or measuring.
Companies ignore competitive issues such as productivity at their peril. There is prosperity beyond North America’s markets. The Made in Canada brand is respected around the world and economic conditions are generally positive. Embrace the risks and build up that other basket so Canada’s prosperity will depend a little less on what happens to the world energy market and the impact it has on Alberta’s fortunes.