Ottawa – With the US and Canadian economies slowly shaking off a long winter, the near-term outlook for industrial profitability improved in April 2014. The Conference Board of Canada’s Leading Indicator of Industry Profitability increased by 0.4 points, from 107.6 in March to 108.
The improved outlook in the US has kept the Canadian dollar low, providing pricing support to exporters. Combined with higher raw material prices and advances in equity markets, the short-term profitability outlook for Canadian industries continues to improve, says the Board. Also helping to support the outlook for profitability is the recovery in North American labour markets after a slow start to the year.
The profit outlook on an industry level remained largely unchanged in April, with 28 of the 49 industries in the index advancing. The goods-producing sector (not including manufacturing) continued to lead the improvement.
April was a better, but still uncertain, month in the services sector, with nine of 17 industries posting better profit outlooks and with five posting recoveries from a decline in March. The retail and wholesale trade sector continues to be the weakest, with six of eight of its component industries recording declines in their indexes in April.
The retail and wholesale trade sector underperformed again in April. Of the eight industries tracked by the index, six posted declines, matching the broad sector decline a month earlier.
The wholesale trade industry, motor vehicle dealers, furniture and appliance stores, and building material dealers have all seen their short-term profitability outlook erode for at least the past three months.
The factors hurting the wholesale and retail trade industries are nearly universal: a higher Canadian dollar is increasing input costs, while steep competition is limiting output price growth. Wholesalers and retailers are increasingly finding the rising cost of imported products cutting into their bottom line, with limited ability to pass the higher costs on to consumers.