Modest business growth forecast as manufacturing slows in June


A drop in orders for new manufactured goods, coinciding with the suspension of production activity in the Alberta oilsands, has resulted in a slight drop in the RBC Canadian manufacturing Purchasing Managers’ Index (PMI) for June. The PMI dropped from 52.1 in May to 51.8 in June. The index has been above 50, indicative of growth, for the past four months. The Alberta oilsands slowdown is expected to result in negative GDP growth for the second quarter, according to RBC.

Ontario, with the largest manufacturing sector in the country, was hardest hit, with its index dropping from 55.1 in May to 53.6 in Junes. The pace of growth, as measured by output and employment, fell. However new business volumes grew slightly as a result of stronger domestic sales. RBC economist Craig Wright noted that currency weakness and stronger US demand “should drive further exports” though there is growing economic uncertainty in Canada and the US.

Nevertheless, a new Business Outlook Survey by the Bank of Canada forecasts “steady, modest” business momentum for the rest of 2016. Businesses are expecting only marginal sales growth over the next twelve months, with the outlook particularly gloomy among companies most affected by the oil slump. These companies are mainly concentrated in the West.

Outside of the commodity industries affected by the oil shock, businesses remain more optimistic, once again citing the weaker Canadian dollar and expected demand from the United States. That foreign demand will not be enough to offset domestic weakness for many companies, the survey found.

Investment in machinery and equipment will increase modestly in the next twelve months, with those companies linked to the energy sector curtailing investment spending. The survey revealed that even companies not directly tied to the energy sector had only modest investment plans for the coming year.

In general, firms said they planned to add jobs over the coming year, but companies in the energy supply chain will likely cut jobs. Firms in the service industries, on the other hand, including consumer and business services and real estate, will increase their workforces.

Did you miss this?

Other Popular Stories

  • Time running out for dealing with global greenhouse emissions: report
  • Tesla's Powerwall revealed, energy storage for the home
  • GO Transit may deploy hydrogen-power rather than electric; consults with Canadian fuel cell technology company that worked on world's first hydrogen-powered train
  • Airbus and Bombardier Finalize Deal
  • Federal money continues to flow to clean technology innovators
  • Civil Engineering Design: What it Takes to Engineer the World’s Longest Tunnels
  • Australian researchers claim new efficiency record for solar cells
  • Scientists Develop Sustainable Battery Using Tree Bark Tannins
  • Oilsands companies hope to innovate cleaner, more profitable future
  • Forestry sector providing job relief for former oil patch workers
  • CSeries on track for 300 orders: Bombardier
  • Jaguar Land Rover Set to Move Discovery Production from United Kingdom to Slovakia
  • Fracking study finds methane emissions lower than EPA estimates
  • Containment system can trap offshore oil leaks, protect environment
  • Mississauga aerospace firm announces major contracts with Boeing, F-35 program
  • Bombardier, Air Canada Jazz taking part in European MRO event
  • Canada's west to lead growth of economy for 2017 at 3.3 per cent: Conference Board of Canada
  • Federal government must help Ontario close widening "skills gap" through immigration reforms
  • Ontario's food producers missing local growth opportunities: study
  • Economy outperforms in January; manufacturing leads broad-based growth
Scroll to Top