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Weak gains expected in Canadian manufacturing

Western Manufacturing’s Grande Prairie facility. The company specializes in steel fabrication and manufacturing for the oil fields.

Chris Beauchamp/The Globe and Mail

Flooding in Alberta and a relatively strong Canadian dollar have economists predicting weak growth in manufacturing when Statistics Canada releases the results of its June survey later this week.

While Alberta is known mainly for its commodities, many companies there produce goods for the oil patch and the floods that ravaged the province in June could very well have an impact on the national manufacturing figures, said Royal Bank of Canada assistant chief economist Paul Ferley.

"There were reports that some production facilities were hampered by the flooding, so we're assuming that it will play out in the data," Mr. Ferley said. Although he stressed that it's still a question mark.

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Mr. Ferley is calling for a modest rise in manufacturing sales of 1 per cent for June, coming in slightly higher than May, when sales increased 0.7 per cent to $48.6-billion for the month.

Benjamin Reitzes, senior economist at BMO Nesbitt Burns, also thinks that the June survey will show relatively weak gains.

"Commodity prices were a bit higher in the month, so that should provide a bit of an offset, but not quite enough," Mr. Reitzes said.

With strong indications of economic improvement south of the border, both economists see a rosy future for Canadian manufacturers.

"We're a little more bullish on the U.S. economy than consensus – maybe a little less so than we were a month ago – but we're still looking for pickup in the second half of this year and growth above 3 per cent for all of next year," Mr. Reitzes said.

That, along with a potentially weaker Canadian dollar, should help give manufacturing a boost, he added.

On the factory floor, the picture is mostly optimistic, said Robert Hattin, chief executive officer of Hamilton-based ProVantage Automation and chairman of Canadian Manufacturers & Exporters.

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"We have one of the most educated work forces in the world, we are located right beside the largest economy in the world, we have low interest rates, one of the best corporate tax rates in the world, so my question to those [companies] who are shutting down, wondering what they are going to do tomorrow is: 'What's wrong with that picture?' " Mr. Hattin said.

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