Expect some weakening in Canadian corporate profitability over the next six months, according to the Conference Board of Canada's Leading Indicator of Industrial Profitability
OTTAWA—Expect some weakening in Canadian corporate profitability over the next six months as the Conference Board of Canada’s Leading Indicator of Industry Profitability declined in July for the first time in almost a year.
To make matters worse, the July result is based on average data obtained before the global financial turbulence earlier this month.
Many Canadian manufacturing industries, which are heavily dependent on exports to the U.S., experienced further drops in their indices last month. However, the weakening outlook extends beyond the manufacturing sector. Service industries such as the insurance and real estate have also begun to see decreases.
As well, some producers of raw materials have seen their indices decline recently. The agriculture and forestry industry was hurt by the soggy spring in the Prairie provinces. Millions of acres of unseeded farmland will likely result in a record low crop stock.
The mining industry suffered from flooding and wildfires in northern Alberta and Ontario. Many companies were forced to halt production—almost every segment of the mining industry has experienced production slumps.
As if on queue, Statistics Canada is reporting that manufacturing sales in Canada fell for a third consecutive month in June, hitting their lowest level since November 2010.
The drop of 1.5 per cent to $45.3 million was steeper than predictions by economists who had expected a drop of 0.5 per cent from the previous month.
Here are some highlights of Statistics Canada’s June report:
-Constant dollar manufacturing sales were down 1.6 per cent in June.
-Sales of durable goods fell 1.9 per cent, while sales of non-durable goods were down 1.2 per cent lower.
-Lower sales were reported in 15 of 21 industries, representing 77.5 per cent of total manufacturing.
-Miscellaneous manufacturing sales fell 16.1 per cent after rising 2.4 per cent in May due to a drop in sales by manufacturers of jewellery and silverware.
-Machinery manufacturing sales dropped 4.2 per cent in June after a 7.8 per cent increase in May.
-Meanwhile, sales in the chemical industry gained 5.8 per cent on gains in the pesticide, fertilizer and other agricultural chemical industry.