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File photo of an employee feeding steel struts into a furnace on the assembly line at Standen’s Ltd. in Calgary. (Chris Bolin for The Globe and Mail)
File photo of an employee feeding steel struts into a furnace on the assembly line at Standen’s Ltd. in Calgary. (Chris Bolin for The Globe and Mail)

economy

Canadian manufacturers set to shake out the cobwebs Add to ...

Forget the high dollar, Dutch disease, cheap imports and the global economic slump.

Canadian manufacturers are surprisingly optimistic about the future.

In fact, most of them plan to boost spending, hire more workers and generate higher profits over the next three years, according to a survey of nearly 650 factory executives by the Canadian Manufacturers and Exporters (CME) to be released Thursday.

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The upbeat findings are in stark contrast to the prevailing sense of gloom about manufacturing among many analysts and policy makers.

“That’s what I see out there – a lot of optimism,” CME chief executive Jayson Myers said in an interview.

“Canadian companies have weathered the deepest recession since the 1930s, and the companies that have survived have found more market opportunities. Many of them are busier that ever.”

Among the key survey findings, 73 per cent are forecasting higher profits, 77 per cent expect to boost output, 83 per cent are looking for higher sales and 71 per cent say they will add workers, according to the survey conducted between May 22 and July 1.

Sixty-six per cent intend to increase spending on machinery and equipment, and 55 per cent said they would spend more on research and development.

That isn’t to say manufacturers aren’t facing significant challenges.

Their chief concern? Stiffer competition in their core markets, according to the survey. Their other major trials are the high dollar, finding good workers and global economic conditions.

“Often we don’t see the innovation and how entrepreneurial these companies are because we get caught up in the challenges,” Mr. Myers said.

The survey also shows widespread dissatisfaction with planned changes to the country’s R&D tax credit regime announced by the federal government in the last budget. Seventy per cent of respondents said the move to make capital expenditures ineligible for the credit will cause them to curtail R&D spending. Another 18 per cent said they would shift research outside the country.

Six out of 10 manufacturers use the Scientific Research and Experimental Development credit program, which costs Ottawa and the provinces $5-billion a year.

To deal with skills shortages, CME is urging Ottawa to introduce a workplace training tax credit that would offset employment insurance premiums.

Of the survey’s 649 respondents, 53 per cent are in Ontario, 26 per cent in Quebec, 21 per cent in B.C. and the rest scattered across the country. Sixty-one per cent export to the United States and 28 per cent to China. More than 80 per cent are Canadian-based. The most common types of manufacturers are metal fabricators (19.1 per cent) and machinery and equipment manufacturers.

Manufacturing sales and shipments have continued to recover from the 2008-209 recession, but still remain below the peak reached in the mid-2000s.

On Tuesday, Statistics Canada reported that manufacturing sales rose 1.5 per cent in August, compared to July, paced by healthy growth in Ontario. But many economists aren’t optimistic about the rest of the year due to the high dollar and relatively high commodity prices.

The Bank of Canada’s third-quarter survey of businesses, which was released on Monday, showed waning optimism as companies of all kinds pull back on investment and hiring plans in face of economic uncertainty.

The CME survey, however, suggests something quite different. Manufacturers are either unrealistic about their real prospects, or Mr. Myers is right. The survivors of the recession and the oil-infused dollar really are battle-hardened for a much tougher competitive environment ahead.

 

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