OTTAWA, May 25 /CNW/ - Some Canadian industries, such as professional services and those tied to commodities, can expect a relatively quick recovery from the recession. Other industries will take longer to return to pre-recession levels, and some are unlikely to fully recover, according to the Canadian Industrial Profile Service - Spring 2010.
Published by The Conference Board of Canada in association with Business Development Bank of Canada, this edition of the service provides a five-year (2010-2014) production, revenue, cost and profitability forecast for six Canadian industries:
- Electrical Equipment
- Fabricated Metal Products
- Machinery Manufacturing
- Oil and Gas Support Activities
- Professional Services
- Textiles and Apparel
"Among the industries covered in this outlook, professional services and industries with ties to rising commodity prices - notably oil and gas support activities - will post the fastest recovery," said Michael Burt, Associate Director, Industrial Economic Trends. "Manufacturing industries, particularly those that produce components for other manufacturers, will struggle to return to pre-recession levels because they are facing a strong Canadian dollar and considerable production capacity is still lying idle."
BDC's lending activities increased dramatically over the course of the recession and in most of the industries covered by the Conference Board's outlook. For instance, BDC's support in the professional services industry has grown by nearly 60 per cent compared to the pre-recession level. Within the energy support sector, BDC's portfolio doubled over the last three years, despite the fact that this industry had cool down substantially.
"Looking forward, BDC will continue to support sound businesses along their growth path through the recovery period and beyond, from all industrial sectors," said Jérôme Nycz, Vice President, Strategy and Enterprise Risk Management.
From a peak of $577 million in 2007, industry profit levels have fallen two years in a row, and are expected to decline again in 2010 to $383 million. Faced with growing competition from imported products, electrical equipment industry profits are not expected to return to 2007 levels through 2014. The segments that produce generators and distribution equipment, along with batteries and telecom-related products such as cable and wiring, have the best prospects for growth.
Serving primarily construction and manufacturing clients, the industry is staging a rebound in production and profit thanks largely to stronger automobile output and the final stages of public infrastructure stimulus. Still, industry profits of $1.2 billion in 2010 will be about half of 2008 levels, and they are not expected to surpass the pre-recession peak through 2014.
The recovery will lag that of the overall manufacturing sector. Private investment in new machinery and equipment will remain limited until machinery idled during the recession is put back to productive use. Profit levels are expected to decline for the second consecutive year in 2010 - to $680 million - and not fully recover before 2014.
Oil and Gas Support Activity
Highly dependent on oil and particularly natural gas prices, the industry is expected to see profits more than double this year (to $544 million), following a decline of 68 per cent in 2009. Natural gas prices are expected to remain weak, but oil prices have risen significantly, which will increase demand for support activities. Profit levels are expected to exceed their 2008 highs by 2013.
The diversity of the industry - which includes engineering, architectural, legal, accounting and administrative services - allowed it to emerge from the recession in better shape than most. Profits fell by 23 per cent in 2009 and are expected to rise slightly in 2010 to $5.5 billion, with steady growth anticipated throughout the forecast period.
Textiles and Apparel
After years of declining profit levels, the textiles and apparel industry lost money in 2009. The industry is expected to return to the black in 2010, but production in 2014 is expected to be barely half of its mid-2000s levels.
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.
BDC is Canada's business development bank. From more than 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs. For more information, visit www.bdc.ca.
SOURCE Business Development Bank of Canada
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