Markets stabilizing, but challenges still threaten to stall recovery: survey

The vital signs of Canada’s manufacturing and exporters continue to stabilize but the economic prognosis is for a slow and painful recovery, according to Canadian Manufacturers & Exporters’ August Business Conditions Survey.

“Technically, the recession appears to be over. Most manufacturers and exporters are no longer seeing customer orders in freefall. But, in reality, Canadian companies still have many challenges to face on the road to recovery,” says CME president and CEO Jayson Myers. “The threats of a volatile and appreciating currency, higher commodity and energy costs, increasing protectionism in the US and other export markets, and continued difficulties accessing credit may all endanger the recovery that is now getting underway.”

The results of CME’s August survey reinforce the glimmer of hope that has appeared in previous months. Click here to read the full Business Conditions Survey report.

A total of 692 manufacturers and exporters participated in the survey which was conducted the last three weeks of August. Approximately 51 per cent of respondents indicate that orders have fallen over the past three months, down from 65 per cent in April.

Three-quarters of companies report that they expect the value of new orders to stay the same or increase in value over the next three months, up three percentage points from July.” Only 26 per cent say that orders are likely to decrease between August and October of this year, down three points from last month.

This is a markedly more optimistic outlook than in March when 49 per cent of companies were expecting new orders to drop in the coming three months, and only 18 per cent expected to see orders increase.

However, the more optimistic outlook for orders will not immediately translate into stronger economic growth. Approximately 24 per cent per cent of firms plan to cut their workforce over the next three months. In July, 21 per cent were planning layoffs.

“The manufacturing sector has lost more than 194,000 jobs so far this year. Unfortunately, we see lay-offs continuing throughout the second half of the year.

The credit crunch continues to be a major obstacle for manufacturers and exporters, with 71 per cent of companies responding to the survey reporting difficulties in obtaining financing for working capital purposes, operating lines of credit, capital investment purposes and investments in new technology.

Since the beginning of the year, we have had more than 70 per cent of firms consistently reporting greater difficulties in accessing adequate financing.

“Financing constraints are one of the biggest threats to this recovery,” Myers added. “Credit is the oxygen that firms need to grow. Without secure access to financing, forget any hope of a strong recovery.”

Canadian Manufacturers & Exporters (CME) is Canada’s leading trade and industry association and the voice of manufacturing and global business in Canada.

Manufacturing success of Canadian companies since 1871, the association represents more than 10,000 leading companies nationwide. More than 85 per cent of CME’s members are small and medium-sized enterprises. As Canada’s leading business network, CME, through various initiatives including icosmo.ca and the establishment of the Canadian Manufacturing Coalition, touches more than 100,000 companies from coast to coast, engaged in manufacturing, global business and service-related industries.

CME’s membership network accounts for an estimated 82 per cent of total manufacturing production and 90 per cent of Canada’s exports.
www.cme-mec.ca