Improving business confidence and hiring will drive stronger performance in most Canadian business services industries in 2017

OTTAWA, June 20, 2017 /CNW/ - Canada's accounting, advertising, consulting, and engineering industries are all set to see improved growth this year, while output in the employment services and real estate industries will moderate but remain healthy, according to a new series of industrial profiles by The Conference Board of Canada.

"Many of Canada's business services industries have been negatively affected by weakness in the energy sector and economy over the past two years. However, this year most of the industries will see improvements due to slightly higher oil prices and an accelerating pace of job creation," said Michael Burt, Director, Industrial Economic Trends, The Conference Board of Canada. "The engineering and consulting industries will additionally benefit from the federal government's plan to increase infrastructure spending."

Highlights

• Many of Canada's business services industries have been affected by weakness in the energy sector.
• Pre-tax profits in the real estate industry are expected to reach $15.2 billion in 2017.
• Increased government infrastructure spending will support the engineering industry, which will see pre-tax profits rise to $3.9 billion this year.

Real Estate
Real estate agents and brokers are benefiting from low mortgage rates that are supporting a hot housing market, particularly in Southern Ontario and the Greater Vancouver Area. Outside of these regional markets, conditions are generally cooler but most provinces have experienced expansion in their real estate services in recent years. Growth in the industry is expected to moderate as new measures to re-balance the market take place. On the non-residential side, e-Commerce is rapidly expanding in Canada, stimulating warehouse space demand, but curtailing demand for retail space. All in all, industry pre-tax profits are expected to grow by 1.1 per cent this year to reach $15.2 billion.

Engineering
Demand for engineering services has been heavily affected by the decline in commodity prices over the last few years. The resulting drop in related business investment has meant that employment, prices, and sales in engineering services have all shrunk considerably. The industry will begin staging a recovery in 2017, due in part to improving conditions in the oil and gas industry, and increased government infrastructure spending. In addition, residential construction has shifted markedly to high-rise condos, which require more engineering work than single-family units. Following a 32 per cent dip in profits in 2016, the industry will see pre-tax profits rise by more than 24 per cent to reach $3.9 billion this year.

Employment Services
The pace of job creation in Canada has improved considerably in the past year, which translates to healthy growth in the employment services industry. Labour markets have tightened and many businesses will need to turn to employment services firms to find the people they need. In addition, increasing use of technology in the industry will improve both productivity and success rates. While pre-tax profits in the industry are projected to drop modestly from $382 million in 2016 to $365 million this year, they are forecast to reach $405 million in 2018.

Accounting
Reflecting the general weakness in Canadian business conditions, demand for accounting services has been sluggish over the past two years. However, the industry's pace of growth is expected to be better in 2017 and beyond as underlying business trends improve. Rising export opportunities and increases in consulting revenues will also support the industry's growth. Continuing to detract from the growth, however, is the trend toward do-it-yourself accounting software packages. In total, pre-tax profits are anticipated to rise by 4.4 per cent this year to reach $5 billion in 2017.

Advertising
Weak business confidence and consumer spending growth in Canada has been discouraging firms from spending on advertising services. However, the weak loonie and strong U.S. labour market are allowing Canadian advertising firms to become more competitive south of the border. Technological improvements have allowed for more targeted online advertising, which is also increasing the attractiveness of industry services. Overall, pre-tax profits will experience a modest increase from $1.0 billion in 2016 to $1.1 billion in 2018.

Consulting
Despite a recent slowdown driven by weaker business confidence and investment, consulting services—which includes activities like management, scientific, and environmental consulting—have experienced strong growth overall since the financial crisis. Businesses are now outsourcing more of their previously internal operations to consulting firms, which is widening the pool of prospective clients and services for companies. These new business avenues, combined with new complementary technology such as data analytics will support revenue growth, although it will remain below recent norms. Pre-tax profits in the industry are forecast to reach $5.3 billion in 2017 and will maintain a steady pace of growth before reaching $6.4 billion in 2021.

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SOURCE Conference Board of Canada

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