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Canada: Three Quarters In A Row Of Lower Profits For Factories

ByThe National Bank of Canada
Published 11/28/2012, 06:56 AM
Updated 05/14/2017, 06:45 AM
FTNMX552010
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The profitability of Canadian manufacturers deteriorated in Q3. According to just-released data from Statistics Canada, operating profits of manufacturers (excluding petroleum and coal products) declined for a third quarter in a row for a cumulative 30% drop since Q42011 peak. The phenomenon is rather generalized as profits were down from Q42011 in 9 of the 12 manufacturing industries. It is striking that operating revenues were down in the last two quarters, the first such occurrence since the recession.

Price declines for commodities such as primary metals and chemicals are just part of the story. Other sectors have been affected by lethargic exports combined with a 2.9% appreciation of the loonie against the greenback. As today’s Hot Chart shows, the operating margin (operating profits/ operating revenues) has declined for a third quarter in a row, to the lowest level since Q12010. In contrast, operating margins in U.S. manufacturing reached a record level in Q22012. This does not bode well for Canadian manufacturing employment, which was already on a declining trend since its peak last May.
Three Quarters In A Row Of Lower Profits For Factories

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