Canada’s export-dependent manufacturing industries are counting on the U.S. economy and emerging markets to sustain production increases and boost profitability in the face of global economic uncertainty, according to a quarterly report.
Published by the Conference Board of Canada in association with the Business Development Bank of Canada (BDC), the Canadian Industrial Profile provides a five-year forecast for production, employment, revenue, cost and profitability for six industries each quarter.
The summer 2012 edition includes outlooks for aerospace products manufacturing, furniture products manufacturing, motor vehicle parts manufacturing, paper products manufacturing, printing services and wood products manufacturing.
“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,” it says.
The report predicts Canada’s motor vehicle parts production will grow by almost 15% in 2012, but it is still well below pre-recession highs. The strong Canadian dollar, however, will 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.
After three years of declining or stagnant production, aerospace industry output will grow by almost 7% in 2012 on strong demand for aircraft in emerging countries, along with expectations for a sustained recovery in the U.S. This will help to boost production by more than 3% 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.
A long-awaited rebound in the key U.S. housing market is expected to support the outlook for both the wood and furniture industries. Buoyed by export demand, overall production in 2012 will increase by 3.3% in the furniture products industry and by almost 8% in the wood products industry. Prices, however, will increase only modestly over the next four years.
After losing $114 million in 2011, the wood products industry is expected to return to the black in 2012, posting a profit of $208 million. Wood industry profits are expected to more than triple next year to $673 million. Meanwhile, profits in the furniture products industry are forecast to stabilize at about $400 million annually through 2016.
Despite declining production and limited price growth, printing services firms are expected to post profits of $254 million this year, while the paper products industry is forecast to make $229 million this year.
Pierre Cléroux, vice-president and chief economist at BDC, said, “Despite the continued improvement in revenue, profitability and job creation across all sectors, we’re not out of the woods yet.
“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.”
