OTTAWA—A report, published by The Conference Board of Canada in association with the Business Development Bank of Canada (BDC), suggests that although many of Canada’s main manufacturing sectors are growing, there are still challenges ahead.
The most recent edition of the report (Summer 2012) has outlooks for the manufacturing sectors of a variety of industries, including, aerospace products and motor vehicle parts, among others. The Canadian Industrial Profile Service, a subdivision of the Conference Board of Canada, compiled the report.
Many of Canada’s export-dependent manufacturing industries are counting on two things to increase their profitability – the US economy and the demand from emerging markets.
“The continuing financial crisis in Europe is the primary risk to some of Canada’s high-profile manufacturing industries. Turmoil in the Eurozone could further undermine business and consumer confidence in the United States and emerging economies,” said Michael Burt, Director, Industrial Economic Trends. “Most of the industries covered in this outlook are experiencing healthy production growth, but the strong Canadian dollar will limit the prices that export-oriented industries receive for their goods.”
“Despite the continued improvement in revenue, profitability, and job creation across all sectors, we’re not out of the woods yet,” cautions Pierre Cléroux, Vice President and Chief Economist, BDC. “The manufacturing sector is still far from its pre-recession highs and unless Canadian businesses make significant investments in productivity, they will have difficulty competing in the new economic environment.”
Aerospace Industry:
After three years of declining or stagnant production, aerospace industry output will grow by almost seven percent in 2012. There is a strong demand for aircraft in emerging countries, and with expectations for a sustained recovery in the US, production is expected to grow by three percent annually over the next four years. However, weak price growth will limit the industry’s profitability to about $500 million annually in the next couple of years.
Auto parts industry:
Booming vehicle sales in North America have contributed to the recovery of the auto industry. Canada’s motor vehicle parts production will grow by almost 15 percent in 2012 – however, this is still below pre-recession levels and the strong Canadian dollar is expected to limit price growth. As a result, industry profits are forecast to increase modestly from $1.2 billion in 2012 to slightly more than $1.5 billion in 2016.
