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

  • Flying Brain to Assist Astronauts Aboard Space Station
  • Taiwan’s New Solar-powered Building to Generate One Million kWh Per Year
  • Canada should ease foreign ownership rules for uranium, says Sask premier
  • First Energy Island to Provide Electricity for 3 Million Households
  • 3D printed hempcrete could revolutionize construction industry
  • Manufacturing sales up in November, government scraps duties on imported food ingredients
  • Bankrupt hockey skate manufacturer bought by Canadian investors
  • Manufacturing up in December amid uncertainty about future US-Canada relations
  • Greater transparency, accountability called for in new homes warranty plan for Ontario
  • Honda to spend $492 million on Alliston plant upgrades
  • New Samsung-Pattern wind farm underway with Siemens-built turbines
  • Siemens awarded largest ever contract for onshore wind turbines
  • Financial services fastest growing industry in Canada for exports: Conference Board of Canada
  • 3D printed homes in 24 Hours — printed on site: printed villas, offices and floating saunas?
  • Strength to build on, but Canada still lags in industrial R&D
  • Manufacturing recovers ground in January: GDP up 0.2 per cent
  • Ford to boost profits by cutting 1400 salaried workers in North America and Asia
  • NASA Keeping an Eye on Tesla Roadster
  • Saudis will no longer provide "insurance policy" for high-cost oil producers
  • More consultation, less domestic content for Ontario's green energy process
Scroll to Top