OTTAWA, Dec. 18, 2012 /CNW/ - A weak economic outlook and cautious consumers will leave several Canadian industries without much growth this year and next, according to the latest Canadian Industrial Profile published by The Conference Board of Canada and the Business Development Bank of Canada (BDC).
Because of limited sales growth and competitive pressures that will keep prices in check, industries such as retail and wholesale trade, food services and accommodation will see little bottom-line growth in 2013. By comparison, the transportation and warehousing industry can count on price increases and developed cost-control practices to enable strong profit growth going forward.
The Canadian Industrial Profile service provides a five-year forecast for production, employment, revenue, cost and profitability for six industries each quarter. The Autumn 2012 edition includes outlooks for: Accommodation, Food and Beverage, Food Services, Retail, Transportation and Warehousing, and Wholesale Trade.
"Canada is not immune to the economic uncertainty that has weakened global demand for goods and services. Modest employment growth is limiting Canadians' income gains. Consumer confidence remains weak and household debt continues to mount - all of which dampen the willingness of shoppers to spend on retail items, food and drink, dining out and travel," said Michael Burt, Director, Industrial Economic Trends at The Conference Board of Canada.
"In the current business environment, characterized by strong competitive pressures, small and medium-sized businesses who invest in information technology will be better equipped to navigate the challenging economic times ahead," said Pierre Cléroux, Vice President and Chief Economist, BDC.
Retail - Pressure Mounts from Inside and Outside Canada
Industry profits have slipped below 2010 levels in the past two years, to less than $13 billion annually in 2011 and 2012. Retail sales figures have been sluggish in recent months. With Canadian overnight trips to the U.S. hitting a new high in June thanks to new higher duty free exemptions and a strong dollar - and new competitors entering the market - the outlook remains modest for the industry.
Wholesale Trade - Consumer Wariness Comes Through to Wholesales
With retail sales stalled since the first half of 2012, the outlook for the wholesale trade industry has weakened as well. Industry profits achieved double-digit annual growth in 2010 and 2011. But profits levels are forecast to remain at about $19 billion in 2012, and the industry is on track to lose 19,000 jobs this year.
Transportation and Warehousing - Global Uncertainty Threatens Demand
Weak economic performance is slowing demand for air, truck, rail and water transportation services. Yet industry profitability is expected to increase more than 30 per cent in 2012 to $6 billion. Even though revenue growth has slowed this year, the industry has been able to control costs and prices are expected to rise by seven per cent.
Food and Beverage - Industry Squeezed By Higher Costs, Little Price Growth
Output in the food and beverage industry will decline for the second consecutive year. Furthermore, manufacturers are being squeezed by both rising costs and pressure to limit price increases from large retailers. As a result, the industry is forecast to achieve a profit of $4.1 billion in 2012, virtually the same annual level as the previous two years. Organic and natural products (which enjoy higher profit margins) and new overseas markets are likely to be the best options for industry growth in the future.
Food Services - Consumers Tighten their Belts
With consumers cutting back on the amount they spend dining out, full-service restaurants are most affected by the tough economic environment. Rising food prices for products such as wheat and corn raise costs, while fierce competition limits pricing power among restaurants. Industry profits, which increased by more than 15 per cent annually in 2010 and 2011, are expected to grow much more slowly in the years to come.
Accommodation -Travel Budget Constraints Challenge Industry
With the exception of Alberta, where demand for accommodations continues to grow significantly, the industry is contending with slower growth in business and consumer travel spending. Yet the industry has continued to improve occupancy rates by limiting the number of rooms being built. Profits are expected to remain in the range of $850 million annually for the next couple of years.
About the Canadian Industrial Profile Service
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 2,000 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture capital and consulting services to more than 28,000 small and medium-sized companies. Their success is vital to Canada's economic prosperity. For more information, visit www.bdc.ca.
SOURCE: BUSINESS DEVELOPMENT BANK OF CANADA
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