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Cautious consumers weaken economic outlook


December 18, 2012
By Canadian Garden Centre & Nursery

Dec. 18, 2012, Ottawa — A weak economic outlook and cautious consumers will leave several Canadian industries without much growth this year and next, according to The Conference Board of Canada and the Business Development Bank of Canada (BDC).

Because of limited sales growth and competitive pressures that will keep prices in check, industries such as retail and wholesale trade will see little bottom-line growth in 2013. By comparison, the transportation and warehousing industry can count on price increases and developed cost-control practices to enable strong profit growth going forward.

The Canadian Industrial Profile service provides a five-year forecast for production, employment, revenue, cost and profitability for six industries each quarter. The Autumn 2012 edition includes outlooks for retail, wholesale trade and transportation, as well as food and beverage, food services and warehousing.

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"Canada is not immune to the economic uncertainty that has weakened global demand for goods and services. Modest employment growth is limiting Canadians' income gains. Consumer confidence remains weak and household debt continues to mount – all of which dampen the willingness of shoppers to spend on retail items, food and drink, dining out and travel," said Michael Burt, director of industrial economic trends at The Conference Board of Canada.

"In the current business environment, characterized by strong competitive pressures, small and medium-sized businesses who invest in information technology will be better equipped to navigate the challenging economic times ahead," added Pierre Cléroux, vice-president and chief economist at BDC.

In the retail industry, profits have slipped below 2010 levels in the past two years, to less than $13 billion annually this year and in 2011. Retail sales figures have been sluggish in recent months. With Canadian overnight trips to the U.S. hitting a new high in June thanks to new higher duty free exemptions and a strong dollar – and new competitors entering the market – the outlook remains modest for the industry.

With retail sales stalled since the first half of the year, the outlook for the wholesale trade industry has weakened as well. Industry profits achieved double-digit annual growth in 2010 and 2011. But profits levels are forecast to remain at about $19 billion this year, and the industry is on track to lose 19,000.

Weak economic performance is also slowing demand for air, truck, rail and water transportation services. Yet industry profitability is expected to increase more than 30 per cent this year to $6 billion. Even though revenue growth has slowed, the industry has been able to control costs and prices are expected to rise by seven per cent.

The Canadian Industrial Profile Service is part of The Conference Board of Canada's Industrial Economic Trends research. Outlooks for 23 industries are completed each year, and are available at www.e-library.ca.


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