Uncertain economic outlook limits growth in transportation, retail and food industries

OTTAWA, Nov. 24, 2011 /CNW/ - An uncertain economic environment will restrain growth in Canadian industries that rely on consumer willingness to open their wallets, according to the Canadian Industrial Profile-Autumn 2011. Published by The Conference Board of Canada in association with the Business Development Bank of Canada (BDC), the Canadian Industrial Profile provides a five-year (2011-2015) production, revenue, cost and profitability forecast for six industries each quarter.

"Several industries profiled in this outlook have recovered from the 2008-09 recession. But the prospects for continued growth are muted because of weak consumer and business confidence, as well as high household debt levels," said Michael Burt, Associate Director, Industrial Economic Trends.

Accommodation

Worrisome economic news has caused many consumers and businesses to rethink their traveling plans. As well, some Canadians are taking advantage of the strong dollar to travel abroad. Meanwhile, weak international travel to Canada also poses a challenge to the industry's outlook. After a strong rebound in 2010, profits are expected to weaken to about $750 million this year and stagnate in 2012.

Food and Beverage

Higher industry prices are largely responsible for a 15 per cent increase in profitability among food manufacturers this year. However, cost pressures - including the effects of higher agricultural and energy prices - are expected to limit profit growth through 2015. Nevertheless, the industry's fundamentals remain sound, supported by population and income growth in the medium term.

Food Services

Comprised primarily of restaurants and catering services, the industry is on track for a profit of $1.6 billion in 2011, its best performance on record. But high household debt levels and consumers' concerns about the economic outlook are expected to limit growth. In the medium term, the industry should enjoy a modest but steady increase in revenues. Costs will be a challenge to manage as the highly-competitive nature of the industry provides little room for businesses to absorb cost increases. In particular, rising food prices will be a concern, but the industry will maintain its profit margins.

Retail Trade

Several factors will lead to slower retail sales growth and a decline in profitability this year. In particular, Canadians are expected to delay big-ticket and discretionary purchases until their personal and household finances improve. Industry profits are forecast to climb back above $12 billion in 2012 (offsetting most of the decline this year) and post steady growth in sales, revenues and profitability thereafter.

Transportation and Warehousing

Rising labour and operating costs will lower profits to less than $5 billion this year. While the industry as a whole has recovered from the recession, the rebound varies among the different modes of transport. The trucking, air transportation and rail segments have posted strong growth, and the pipeline transportation segment is forecast to record its first increase in output in five years. However, the ongoing economic weakness in the United States is limiting demand for water transportation services.

Wholesale Trade

The wholesale trade industry is expected to post its second consecutive year of growth in revenues and profits. Sales have surpassed pre-recession levels and industry profits are forecast to exceed $20 billion this year.  Nevertheless, business and consumer confidence have weakened, which may have a negative effect on sales in the short term.

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. The publications are available at www.e-library.ca. BDC clients who wish to receive a copy of the profiles free of charge can contact their BDC account manager.

Canada's business development bank, BDC, puts entrepreneurs first. With almost 1,900 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture capital and consulting services to 29,000 small and medium-sized companies. Their success is vital to Canada's economic prosperity. For more information, visit www.bdc.ca.

SOURCE CONFERENCE BOARD OF CANADA

For further information:

Brent Dowdall,
Media Relations,
Tel.: 613- 526-3090 ext.  448
E-mail: corpcomm@conferenceboard.ca

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