Ottawa - The Leading Indicator of Industry Profitability Index has now experienced three consecutive months of declines. The index is compiled by the Conference Board of Canada.
The downward shift in the overall index is a succinct illustration of the slow growth in the Canadian economy. The increasing number of industries registering declines is also a reason for concern, says the Board. In this environment, Canadian corporate profitability may experience a downturn in the near future, it reports.
Canadian property and casualty insurers are suffering heavy losses from the Alberta floods. Besides flooding, the devastating train derailment and explosion in the Quebec town of Lac-Mégantic will also weigh on the industry’s financial results. As a result, the near-term outlook for the property and casualty insurance industry is pessimistic.
Many of the manufacturing and goods-producing industries are showing signs of weakness due to lack of demand both at home and abroad. The chemical manufacturing industry — the fertilizer manufacturing segment in particular — has struggled in recent months with weak demand coming from India and China. The two Asian countries account for roughly 30% of global demand for crop nutrients; thus, lower demand has led to a reduction in potash prices.
Elsewhere in manufacturing, producers of wood products are experiencing lower prices in the face of weather-related delays in US building activities. Fewer Chinese imports and increased sawmill production in North America have also played a part in the pullback in lumber prices, which are down 25% since their peak in the first quarter of 2013. As a result, the wood manufacturing industry profitability index declined this month.
Producers of primary and fabricated metal products are also suffering from low industry prices as well as from the meagre demand from the manufacturing and construction sectors. Year-over-year, primary metal and fabricated metal manufacturing sales have declined 8% and 5% respectively. Likewise, industry prices for primary metal and fabricated metal products have fallen 5% and 1%. Consequently, its profitability index has fallen for 10 of the past 12 months.