Canadian Manufacturing

Corporate profitability outlook on the decline: CBOC

The outlook is not all gloomy, as the mining industry’s profitability outlook has improved thanks to the recent rally in commodity prices.



OTTAWA—The near-term outlook for Canadian corporate profitability is a touch dreary as a claw-back in manufacturing and services combined with slower economic growth to push the Conference Board of Canada’s Leading Indicator of Industry Profitability Index down for the fourth consecutive month.

The domestic housing market has weakened considerably over the past year, a direct result of the tighter mortgage rules and lending guidelines introduced in the summer of 2012. The furniture and appliance stores’ profiitability index is on a seven-month slide, and the building material dealers segment has now dropped in each of the past five months.

Food and beverage stores are another retail segment with a negative profit outlook due, in this case, primarily to an increasingly competitive marketplace. Many segments of the information services sector are also facing negative outlooks as a result of increased competition.

The Bright Side
On the other side are a number of industries with more positive profitability outlooks. The mining industry’s profitability outlook has improved, thanks to the recent rally in commodity prices, especially for copper, steel, and gold. Moreover, gold is often viewed as a safe haven during times of uncertainty.

Rising geopolitical tensions in Syria have also fuelled the rise in oil prices, as worries over conflicts in the Middle East always increase supply concerns. Also, the profitability index of the banking industry has been trending up for the past seven months.

For more information, go to the Conference Board of Canada’s Leading Indicator of Industry Profitability

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