Index of industry profitability continues to rally
Ottawa - The Leading Indicator of Industry Profitability Index advanced 0.2% in April 2013, pointing to modest corporate profit growth in the near term, according to the Conference Board of Canada. Persistent strength in sectors such as retail...
Ottawa – The Leading Indicator of Industry Profitability Index advanced 0.2% in April 2013, pointing to modest corporate profit growth in the near term, according to the Conference Board of Canada. Persistent strength in sectors such as retail services, oil and gas extraction, and agriculture and forestry is propelling the overall index higher.
Consumer spending is an important driver for the Canadian economy in general and for consumer-driven industries, such as retail sales, food services, and accommodations, in particular, the Board said. Retail sales have risen since the start of the year, with notable gains occurring in the general merchandise stores, food and beverage stores, and miscellaneous retailers subsectors. As such, the profitability indexes for these industries are advancing.
Higher retail sales are also supporting related manufacturing industries. For example, the food and beverage and the clothing and textile manufacturing industries also saw their indexes improve in April.
Commodity prices have an important impact on the natural resource industries, said the Board. For instance, higher prices for oil, natural gas, and agricultural products have pushed up the profitability indexes of the oil extraction, gas extraction, and agriculture and forestry industries for the past several months.
The Henry Hub natural gas price reached $3.81 per million British thermal units (mmBtu) in March 2013. Prices have almost doubled from the decade-low mark of $1.95 they fell to in April 2012.
The index for the oil extraction industry jumped 0.9% in April, as price discounts between cheaper Canadian heavy crude and the North American benchmark West Texas Intermediate crude narrowed to $15 a barrel in March. The price differential had been as high as nearly $43 per barrel just four months earlier.
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