Tough economic times are coming

PHOTO: Manufacturers’ confidence has taken a tumble since last year’s Outlook survey/Thinkstock

I hate to be the one to say it, but there are tough economic times on the horizon, and Canadian manufacturing executives need to get ready for them.

The good news: If the information in the Manufacturing Outlook 2019 is anything to go by, they are already preparing for this latest economic battle.

Some more news: On Jan. 29, 2019, I will be conducting a webinar* on the Manufacturing Outlook 2019 report, to dig into its insights. Produced annually by PLANT Magazine, this report reveals what Canada’s manufacturing leaders think about our economic opportunities and challenges. The webinar is being sponsored by SYSPRO, a leading software provider specializing in ERP solutions for manufacturers and distributors. (Check the end of this column for details.)

Researchers for the Manufacturing Outlook 2019 report surveyed 501 senior Canadian executives for their views. Most of the companies (66%) fall into the small business category (under 100 employees). 23% are ‘medium-sized’ (under 500), while 11% are large (500 employees or more).

Not surprisingly, the recent onslaught of Trumpian tariffs and terrorizing tweets, falling oil prices and related shipping problems, Brexit, and rising political tensions globally, have taken their toll on these executives’ psyches.

Add in the renegotiation of NAFTA – oops, I meant CUSMA – issues with China, and the slumping stock market – and 2018 has been a nerve-wracking year. (Did I mention potential losses due to cyber-attacks? Putin’s disruption of the Ukraine and US?)

Onto the survey: Asked how they felt about business prospects for 2019, only 30% of executives surveyed described themselves as “optimistic”. That’s down from 44% in 2018; which is a drop of nearly 32%. Meanwhile, 51% characterized themselves as feeling “cautiously optimistic” about 2019’s business prospects; up one point from 50% in 2018.

The survey was conducted earlier this year. If it was conducted today, I think far fewer Canadian executives would be feeling “optimistic.” This is because they see the coming storm that is stalking the world economy – and they’re very concerned about it.

To address these concerns, Canadian manufacturing executives are pursuing what the report refers to as the ‘Top 5 Growth Strategies’. These are:

• Investing in new machinery, equipment and technology (51%)

• Innovation in products, processes, and technology management (47%)

• Introducing new products (47%)

• Selling more to current customers (42%)

• Scaling up operations (35%)

I will be digging into these Growth Strategies, and other ways to weather the coming financial storm, during my Jan. 29 webinar.

Of course, the world economy has never really settled down since the financial crisis of 2007-2008. The past few years have been profitable, but the mood of business has remained uncertain – and now that sense of lingering unease is being reinforced by actual events.

Personally, if my own economic prognostications were put in weather forecast terms, I’d say that Canadian manufacturers should prepare for unsettled conditions – with a risk of sudden thunderstorms.

This said, savvy Canadian manufacturers will weather the coming storm, just as they have in years past.

To make this happen, they must review their business plans to ensure they’re relevant and up-to-date, then double down on their commitment to them.

They should also persist to diversify customer bases and product/service offerings; keep up with technological change; and find/invest in new business opportunities.

As terrifying as it is to climb into a windswept crow’s nest during a hurricane (another one of my weather-related metaphors), you must do so to spot the rocks that can’t be seen from the ship’s safely enclosed bridge – to find a way to shore.

Most importantly, to survive and thrive Canadian manufacturers must put their customers – specifically the value-added benefits that they provide – first.

After all, when economic conditions get tough, competition for customers will get tougher. To come out on top, your company’s products and services must be the ones that offer the best value to customers, because money is still being spent even in the hardest of times.

None of this comes without risk. For instance, many Canadian manufacturers who have succeeded in diversifying their customer base, thus reducing their reliance on the now-unpredictable US market, have done so by increasing sales in Mexico and Brazil; both volatile nations in their own right.

Bottom line, I predict tough times ahead, but tough Canadian manufacturers will get through them. Attend my webinar* on Jan. 29, 2019, and I’ll tell you much more.

*This webinar is available on demand.

Jayson Myers is an award-winning business economist, specializing in industrial and technological change.