Canadian manufacturing on a roll
Despite significant challenges, Canadian manufacturers have managed to make some impressive gains over the past decade.
The soaring value of the Canadian dollar against its U.S. counterpart has significantly eroded the relative cost-competitiveness of the industry, and international competition is fiercer than ever, Adrienne Warren of Bank of Nova Scotia points out in a recent report.
“Yet against these formidable headwinds, a number of manufacturing industries have excelled, reporting strong gains in production, employment and exports,” she writes.
Two major factors underlie their success, she says: a single-minded focus on specialized, high-value-added products, and the targeting of high-growth markets both at home and abroad.
Anecdotal evidence indicates a growing cluster of successful “niche” manufacturers, even in hard-hit sectors like clothing, she says.
“Perhaps indicative of this trend, manufacturing employment has increasingly tilted in favour of small firms over their larger counterparts over the past decade.”
Last year, small manufacturers (less than 100 employees) employed almost as many workers as the traditionally dominant larger firms (500 or more), she notes.
Stop fretting so much over the euro zone
Europe’s sickly economy is cause for worry but not for alarm as far as the rest of the world is concerned.
That’s the prognosis of National Bank Financial’s Matthieu Arseneau.
The data so far are encouraging for the global economy, he notes in a recent analysis. According to Dutch consultants CPB, world trade bounced back 1 per cent in November, the first increase in three months.
“Despite the fact that financial markets were anticipating the worst over that period, those fears have not been reflected in global demand,” he says.
Yes, Europe’s annualized imports contracted 10.4 per cent during the first two months of the fourth quarter, the latest data available. But global imports remained essentially unchanged, thanks largely to the strong performance of Japan and emerging economies, he notes.
Meanwhile, the ratio of industrial production to trade is far from showing an excess that could be the basis for a future pullback, he adds.
Europe’s recession notwithstanding, the United States and especially the emerging countries should “help save the day for the world economy in 2012 if a global financial crisis is averted.”
Mr. Arseneau sees global growth this year at 3.4 per cent.
U.S. manufacturing spurt may not last
Manufacturing activity south of the border has been showing signs of resilience.
Rather than suffer declines as a result of more modest demand from Europe and Asia, U.S. manufacturers are actually gaining market share on the world stage, says Capital Economics’ Paul Dales.
And the latest manufacturing employment numbers are encouraging, too. Employment in the sector has risen by 330,000 from its low point in December, 2009, and has increased in each of the final three months of last year.
Nevertheless, hopes that the sector will help save the U.S. economy from another year of weak growth are not well grounded, Mr. Dales writes in a recent report.
That’s because the industry’s recent revival may be due to temporary factors that are now fading, he warns.
For one, the now-defunct accelerated tax depreciation investment allowance was no doubt responsible for some of the strength in output of business equipment. And, manufacturers may find 2012 more difficult than last year as the U.S. dollar rises and global demand weakens, according to Mr. Dales.
“Talk of a manufacturing renaissance is a bit far-fetched,” he concludes.