Canadian profits to take 20% trim: Conference Board
Last Updated: Monday, November 9, 2009 | 6:25 PM ET
CBC News
Profits are set to decline by as much as 20 per cent across a host of industries this year, the Conference Board of Canada predicted Monday.
A report said profits in most of the six industries the board monitors, including food services, retail, transportation and wholesale have been affected by lower demand and pressure to pull back prices.
The Conference Board of Canada says the recession has cut retail profits by 32 per cent this year (CBC) Canada's economy has shown some signs of tepid recovery, but much of the economy is still experiencing financial trouble, the report said.
Michael Burt, the associate director of industrial economic trends at the Ottawa-based forecaster, noted that transportation and warehousing profits have fallen 29 per cent to $5.2 billion, because of lower demand and diminishing global trade and manufacturing production.
Profits in the wholesale trade sector will fall for the second consecutive year in 2009, from $14.5 billion to $11.2 billion. But as the recession fades, profit growth will resume in 2010, the report predicts.
Retail has suffered from weaker consumer demand and price cuts, which have slashed its profits by 32 per cent to $8.6 billion, Burt said.
Canadians travel less
In the accommodation sector, Canadians are staying closer to home, but domestic demand has not been enough to offset the sharp decline in U.S. and foreign travellers. With the advent of H1N1, the sector could be in for further tough times, the report warns.
“On the upside, the recession has lowered input prices and limited wage growth, reducing cost pressures" in the economy overall, Burt said.
Investors will find the report's findings worrisome because any indication of weaker future profits means lower share prices and less spending on new equipment and research and development.
Burt said the numbers appear especially dramatic because they're compared with financial results from last summer, before the recession set in.
"What we're seeing now are varying effects, " he said. "There's some indications the economy has found a bottom and may be starting to improve a little bit."
With files from The Canadian Press
