Clouds on the export horizon

Canada’s export-dependent manufacturing sector continues to face challenges and is counting on emerging markets and recovery in the United States to sustain growth, according to a new study released Tuesday.

Canada’s export-dependent manufacturing sector continues to face challenges and is counting on emerging markets and recovery in the United States to sustain growth, according to a new study released Tuesday.

The study, published by the Conference Board of Canada in association with the Business Development Bank of Canada, says the ongoing financial crisis in Europe is the biggest cloud on the horizon for Canadian manufacturers.

The high value of Canada’s dollar also continues to limit prices and profitability, the study says.

The profile provides a five-year forecast for production, employment, revenue, cost and profitability for six industries each quarter.

The Summer 2012 profile includes outlooks for aerospace products, furniture, motor vehicle parts, paper products, printing services and wood products.

“The continuing financial crisis in Europe is the primary risk to some of Canada’s high-profile manufacturing industries,” the Conference Board’s Michael Burt said in noting that turmoil in the eurozone could further undermine business and consumer confidence around the globe.

While most of the industries covered in the current outlook have been experiencing healthy production growth, “the strong Canadian dollar will limit the prices that export-oriented industries receive for their goods,” added Burt, the board’s director, industrial economic trends.

The loonie has been trading near parity with the U.S. dollar since late July. It was 0.37 up of a cent Tuesday morning to a fresh 3 1/2-month high of 101.54. The last time the dollar was bellow 99 cents US was on July 26.

Pierre Cleroux, vice-president and chief economist at the BDC, said that despite the continued improvement in revenue, profitability and job creation across all sectors, “we’re not out of the woods yet.”

“The manufacturing sector is still far from its pre-recession highs and unless Canadian businesses make significant investments in productivity they will have difficulty competing in the new economic environment,” Cleroux said

On an industry basis, the study found:

— Auto parts: The recovery of the auto industry is in full swing, thanks to surging vehicle sales in North America. Although Canada’s motor vehicle parts production will grow by almost 15 per cent in 2012, it is still well below pre-recession highs and the strong Canadian dollar will limit price growth. As a result, industry profits are forecast to increase modestly from $1.2 billion in 2012 to slightly more than $1.5 billion in 2016.

— Aerospace: After three years of declining or stagnant production, Canada’s aerospace industry output will grow by almost seven per cent in 2012. Strong demand from emerging countries, along with expectations for a sustained recovery in the United States is expected to help boost production by more than three per cent annually over the next four years.

However, weak price growth will limit the industry’s profitability to about $500 million annually in the next couple of years.

— Wood and furniture: A long-awaited rebound in the key U.S. housing market is expected to support the outlook for both the wood and furniture industries. Buoyed by export demand, overall production in 2012 will increase by 3.3 per cent in the furniture products industry and by almost eight per cent in the wood products industry. Prices, however, will increase only modestly over the next four years.

After losing $114 million in 2011, the wood products industry is expected to return to the black in 2012, posting a profit of $208 million. Wood industry profits are expected to more than triple next year to $673 million. Meanwhile, profits in the furniture products industry are forecast to stabilize at about $400 million annually through 2016.

— Paper products and printing services: Online media, e-readers and tablet computers are displacing demand for paper and printing services. As a result, production levels in both the paper products and printing services industries will continue their recent declining trend.

The industries have shed about 20,000 jobs each since 2008. Yet, despite declining production and limited price growth, both industries are marginally profitable. Printing services companies are expected to post profits of $254 million this year, while the paper products industry is forecast to make $229 million in 2012.

As well, the outlook for paper products manufacturers is expected to show modest growth beginning in 2013 amid growing demand in emerging markets. The industry is also exploring new uses for forest resources, such as producing biochemicals and bio-energy from wood fibre.

The Canadian Industrial Profile Service is part of the Conference Board of Canada’s industrial economic trends research. In all, outlooks for 23 industries are completed each year by the Ottawa-based think-tank.

The BDC, with almost 2,000 employees and more than 100 business centres across the country, offers financing, subordinate financing, venture capital and consulting services to 29,000 small- and medium-sized companies.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Public Schools says that in the absence of additional funds from the provincial government, there was no consideration of using alternate classroom sites in the district. (AP Photo/Gregory Bull)
Red Deer Public Schools launches online engagement process

Red Deer Public schools is seeking community input to help ensure a… Continue reading

Red Deer Rebels defenceman Mason Ward battles with a Medicine Hat Tigers’ forward during the WHL Central Division season opener. (Photo by Rob Wallator/ Red Deer Rebels)
Tigers come back to spoil Red Deer Rebels home opener

It’s been nearly 345 days since the Red Deer Rebels last played… Continue reading

Students walk into Hunting Hills High School, which is one of the Red Deer Public Schools with solar panels on its roof. (Photo by SEAN MCINTOSH/Advocate staff)
Red Deer high school was placed in lockdown following potential threat

Hunting Hills High School was placed in a lockdown Friday after Red… Continue reading

Red Deer Mayor Tara Veer says some details of the provincial government’s 2021-22 budget need to be ‘sorted out’ when it comes to the hospital expansion funding. (File photo by Advocate staff)
More detail needed regarding hospital funding, says Red Deer mayor

Red Deer Mayor Tara Veer says some information is unclear regarding the… Continue reading

Alberta Health reported two new COVID-19 deaths in Red Deer Friday. (Image courtesy CDC)
Two more deaths linked to Olymel outbreak in Red Deer

Province reported 356 additional COVID-19 cases Friday

An arrest by Red Deer RCMP is facing online scrutiny. No charges have been laid and the incident is still under investigation. (Screenshot of YouTube video)
Red Deer RCMP investigating violent arrest caught on video

Police say officer ‘acted within the scope of his duties’

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto, Thursday, Jan. 7, 2021. A single dose of Pfizer-BioNTech's COVID-19 vaccine is barely enough to cover the average pinky nail but is made up of more than 280 components and requires at least three manufacturing plants to produce. THE CANADIAN PRESS/Nathan Denette
From science to syringe: COVID-19 vaccines are miracles of science and supply chains

OTTAWA — A single dose of Pfizer-BioNTech’s COVID-19 vaccine is barely enough… Continue reading

Crosses are displayed in memory of the elderly who died from COVID-19 at the Camilla Care Community facility during the COVID-19 pandemic in Mississauga, Ont., on November 19, 2020. The number of people who would have died from a COVID-19 infection is likely to be much higher than recorded because of death certificates don't always list the virus as the cause of a fatality, experts say. THE CANADIAN PRESS/Nathan Denette
Death certificates don’t accurately reflect the toll of the pandemic, experts say

The number of people who would have died from a COVID-19 infection… Continue reading

Wetaskiwin RCMP say a Maskwacis man died after he was struck by a vehicle. (File photo by Advocate staff)
Clare’s Law in Saskatchewan used handful of times; Mounties review their role

REGINA — A first-of-its-kind law in Canada meant to warn those at… Continue reading

The Magpie river in Quebec is shown in a handout photo. THE CANADIAN PRESS/HO-Boreal River MANDATORY CREDIT
Quebec river granted legal rights as part of global ‘personhood’ movement

MONTREAL — With its kilometres of rapids and deep blue waters winding… Continue reading

Thorough sanding of a table top is usually the first step to renewing a finish. Wax contaminants can sometimes still remain on a surface like this after sanding. Cleaning with rubbing alcohol and a rag gets rid of these contaminants without leaving a residue behind. (Photo by Steve Maxwell)
Houseworks: Fixing wood finishes

Q: How can I stop polyurethane from beading up on a mahogany… Continue reading

Need a knife? There are knives of all shapes and sizes at The Kitchen Store.
Hints from Heloise: Finding a good set of kitchen knives

Dear Readers: A good set of knives in the kitchen is a… Continue reading

Runner Melissa Bishop-Nriagu speaks to the media at the opening news conference at the Canadian Track and Field Championships Thursday, July 25, 2019 in Montreal.THE CANADIAN PRESS/Ryan Remiorz
Canadian athletes struggling to find competition as they try to qualify for Tokyo

Canadian athletes struggling to find competition as they try to qualify for Tokyo

Most Read