Profits head down

Canadian companies saw their profitability outlook weaken in May after a strong post-recession recovery, and will likely see a modest drop in the second half of the year, according to the Conference Board of Canada.

Canadian companies saw their profitability outlook weaken in May after a strong post-recession recovery, and will likely see a modest drop in the second half of the year, according to the Conference Board of Canada.

A leading indicator that tracks profits across Canada’s various industries fell 0.4 percentage points from April, the second month in a row it has registered such a drop, the Ottawa-based think-tank said.

“The decline suggests that after experiencing a strong post-recession recovery, corporate profitability will weaken modestly in the second half of the year, as interest rates rise,” the Conference Board said.

“The outlook for most industries remains positive, but their rates of profit growth are expected to slow.”

The survey covered 49 industries, 39 of which saw an increase in May, improved from 37 in the previous month.

Profit recovery among Canadian companies is expected to be “uneven” with volatility in commodity prices, currency exchange and interest rates hikes, which began earlier this month when the Bank of Canada raised its key lending rate from rock bottom to 0.5 per cent.

The Conference Board noted that indexes it tracks for Canada’s most influential sectors, such as trucking and wholesale trade, are still showing strong growth.

 
 
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