Industry profitability up in Canada
Canadian business profits helped by stronger labour market and low interest rates
OTTAWA‑The Conference Board of Canada’s (CBOC) Leading Indicator of Industry Profitability rose 0.6 per cent in January.
The gain was identical December’s, marking the strongest consecutive gains in the index since 2001. The solid increase suggests that corporate profitability will improve over the course of this year.
But, 12 of the index’s 49 industries posted declines in January. Several are manufacturing industries that are struggling to compete with international competition, particularly from low-cost countries.
The report says growth was supported by increases in raw material prices, which were up by 32 per cent, improved labour market conditions and a stronger stock market.
The index, however, is still only breaking even to where it was at this time last year. A decline of 2.3 per cent between March and September counteract the four months of increases between October and January.
Low-interest rates are a big part of the reason capital-intensive industries like telecommunications providers and oil extraction companies have seen index increases.
Higher oil prices clearly benefit the oil extraction industry, whose index surged by 5.1 per cent in January. But, higher gas prices have discouraged consumer interest in buying new vehicles. Profitability indexes were down in all auto manufacturing sectors for most of 2010.