OTTAWA, Jan. 12 /CNW/ - Corporate profitability is expected to improve
over the course of 2011, based on a strong increase in The Conference
Board of Canada's monthly Leading Indicator of Industry Profitability (http://www.conferenceboard.ca/e-library/abstract.aspx?did=3941). The index increased by 0.6 per cent in December, its biggest
one-month gain dating back to 2001 (the earliest that data is
Following six months of decline, the leading indicator has risen for
three consecutive months. Still, the overall index has some catching up
to do. Between March and September, it declined by 2.4 per cent and it
finished 2010 about one per cent lower than in December 2009.
"The recent improvement of the index is thanks to stronger
non-residential investment, a rising stock market and increasing raw
material prices," said Maxim Armstrong, Economist. "Thirty-eight of the
49 industries covered by this indicator recorded increases in December,
which is the most since July 2010. Having positive profit indicators in
four out of every five industries is another welcome sign, as it
corresponds with periods of strong economic growth."
Firms in the primary sector are poised for a profitable year. Demand for
several raw materials has boosted both sales and prices. The
agriculture and forestry industry and the mining industry posted the
biggest increases of their index in December compared to a year
earlier― 12.3 and 10.6 per cent, respectively.
The real estate industry had a tough summer, but there is cause for
optimism in this area. Since September 2010, both prices and sales of
existing houses have begun to improve. As a result, the leading
indicator for the real estate industry has increased in each of the
last three months.
The strong Canadian dollar has a significant effect on profitability in
most of the industries covered by the leading indicator — the impact is
positive for some industries and negative for others. In 2010, the
exchange rate was much less volatile than in previous years, but the
Canadian dollar remained very high by historical standards and is
expected to remain at or near parity with the U.S. dollar this year.
The Conference Board's Leading Indicator of Industry Profitability is
constructed from high frequency data series. The indicators are
designed to be predictive of movements in corporate profitability six
months hence. An industry leading index is created for the economy as a
whole, as well as for 49 individual sectors within the economy, thus
providing coverage for most of the private business activity that takes
place in Canada.
SOURCE CONFERENCE BOARD OF CANADA
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448