Canadian Manufacturing

Corporate profitability shows marginal gain: Conference Board

Industry profitability index inched up 0.1 points to 104.6, highest reading since September 2011



OTTAWA—The Conference Board of Canada says its monthly industry profitability report continues to point to modest short-term gains in corporate profitability as the New Year gets underway.

According to the think tank, the overall index inched up 0.1 points to 104.6, its highest reading since September 2011.

More good news lies in the number of industries that saw declines in their respective indexes, with 17 creeping downward—the lowest number in three months.

Low interest rates also continue to boost the profitability outlook for many capital-intensive industries, such as motor vehicle manufacturing.

In an unprecedented step, the U.S. Federal Reserve, has for the first time linked its actions to specific economic markers by signalling that it will keep interest rates near zero until the U.S. unemployment rate drops below 6.5 per cent.

With U.S. rates expected to remain low, the Bank of Canada has indicated that it will also hold off on any interest rate hikes for
the foreseeable future.

As well, the profitability outlook for the gas extraction industry has turned around significantly since early 2012, thanks to higher natural gas prices.

After falling to a decade-old low in April, the Henry Hub benchmark price has more than doubled, averaging US$3/mmbtu (millions of British thermal units) in the final three months of 2012.

The rise in prices has driven up the industry index for six consecutive months now.

Overall, five consecutive months of small gains in the aggregate index suggest that total corporate profitability in Canada is improving, but slowly.

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