Canadian corporate profitability expected to weaken
The Conference Board of Canada’s Leading Indicator of Industrial Profitability declined last month for the first time in almost a year. The July result, based on average data obtained before the global financial turmoil, suggests a weakening in Canadian corporate profitability over the next six month, the Conference Board said.
“The dismal economic recovery south of the border, as well as supply-chain disruptions linked to the Japanese earthquake and the dampening effects of rising inflation on consumer spending have all contributed to the deteriorating profitability outlook,” said economics Lin Ai in a statement.
After recording no growth in the previous two months, the leading indicator recorded a small decline of 0.1 per cent in July. As well, an increasing number of industries are recording declines in their indices. Of the 49 industries covered, 18 recorded a drop in their indices in July, the highest number since the fall of 2009.
Canadian manufacturing industries are reliant on U.S. exports and experienced drops in their indices in July, but the weak outlook goes beyond manufacturing and other industrial sectors, said the Conference Board.
“Service industries such as insurance and real estate have also begun to see decreases in their indices. Factors include lower returns on investment portfolios as a result of the declining stock market, and weakening consumer spending due to rising debt burdens and declining confidence.”
