Investment in mining and oil and gas sectors stimulates demand in other Canadian industries
Ottawa, ON – Massive investment in the oil and gas and mining sectors is fuelling growth in industries ranging from manufacturing to engineering, according to the Canadian Industrial Profile-Spring 2012 published by The Conference Board...
Ottawa, ON – Massive investment in the oil and gas and mining sectors is fuelling growth in industries ranging from manufacturing to engineering, according to the Canadian Industrial Profile-Spring 2012 published by The Conference Board of Canada in association with the Business Development Bank of Canada (BDC).
The Canadian Industrial Profile provides a five-year (2012-2016) production, revenue, cost and profitability forecast for six industries each quarter. The Spring 2012 edition includes forecasts for:
- Electrical Equipment
- Fabricated Metal Products
- Machinery Manufacturing
- Oil and Gas Support Activities
- Professional Services
- Textiles and Apparel
“It is interesting to note that the economic boom linked to oil and gas and mining activities is benefiting many industries – not only in Western Canada, but throughout the country,” said Pierre Cléroux, vice-president, economic analysis, at BDC. “In addition to the positive impacts related to the dynamism of the oil and gas and mining sectors, businesses in many manufacturing sectors are performing well thanks to the growth in exports to the US – a first since the end of the recession. Despite the strong dollar, which is an ongoing challenge to the competitiveness of businesses, and the uncertainty created by the eurozone debt crisis, the outlook is positive for many Canadian entrepreneurs.”
“Driven by high commodity prices, investment in the Canadian mining industry continues to grow at a robust pace. In addition to boosting the support activities for oil and gas industry, this investment boom will stimulate demand for machinery, fabricated metals and architecture and engineering services,” said Michael Burt, the Conference Board’s director, industrial economic trends.
The Conference Board forecasts oil prices to remain high, at over $100 per barrel for the next couple of years, which will drive investment in the oil sands and support demand for firms to provide contract drilling and field support activities. Profits in the oil and gas support activities industry, which nearly quadrupled between 2009 and 2011, are forecast to double again in 2012 to $310 million. However, fierce competition within the industry is expected to keep profit margins thin, and employers in Western Canada are again facing labour shortages – which will drive up wage costs.
Machinery manufacturing is seeing growth in exports to the United States and a significant increase in demand for agriculture, construction and mining machinery equipment. Despite limited price growth, profits are forecast to exceed $1.9 billion this year, which would bring the industry’s bottom line back above its pre-recession level.
Fabricated metal products are a key input into manufactured goods, such as machinery and equipment, and automobiles. The strong outlook for mining investment and the upturn in manufacturing output will allow the industry to continue its recent growth – profits are forecast to exceed $1.5 billion in 2012. However, the industry’s longer-term prospects are muted because it has made few inroads into emerging markets, where growth is expected to be much stronger than in North America.
Professional services, which includes firms in accounting and legal services, architecture and engineering, administration, computer and advertising, and waste management, saw profits dip almost 30 per cent to $6.3 billion in 2011. But the industry is poised for a rebound in 2012 and beyond, as computer design and advertising firms benefit from increasing use of smartphones and tablets, and mining investment increases demand for engineers and architects.
Profits doubled in 2011 in the electrical equipment industry thanks to strong export growth, especially to markets other than the United States. Profits are expected to increase more than 26 percent this year to $443 million due to strong growth in overall non-residential investment in 2012. However the strong dollar and foreign competitors will continue to pose challenges to industry segments such as household appliances and lighting manufacturers.
The textiles and apparel industry continues to face the twin challenges of growing imports and a strong dollar, which makes profit margins exceedingly slim. The industry is forecast to post 2012 profits of $71 million, down slightly from 2011. Pockets of growth in the industry can be found among those firms that successfully integrate producers from low-cost countries into their supply chains, and those companies that focus on high-end textiles and apparel.
The Canadian Industrial Profile Service is part of The Conference Board of Canada’s Industrial Economic Trends research. In all, outlooks for 23 industries are completed each year. The publications are available at www.e-library.ca. BDC clients who wish to receive a copy of the profiles free of charge can contact their BDC account manager.
Canada’s business development bank, BDC, puts entrepreneurs first. With almost 1,900 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture capital and consulting services to 29,000 small and medium-sized companies. Their success is vital to Canada’s economic prosperity. For more information, visit www.bdc.ca.