Source: The Canadian Press

Profits in three of six main Canadian industry sectors are expected to rebound strongly this year before a general weakening of economy activity again in 2011, according to a report issued today by the Conference Board of Canada.

The report, the fall 2010 edition of the Canadian Industrial Profile Service, provides a production, revenue, cost and profitability forecast for six Canadian industries: accommodation, food and beverage manufacturing, food services, retail trade, transportation and warehousing and wholesale trade.

Three of them — food services, retail and accommodation — are expected to see profits rebound by more than 20% this year, according to the report published by the Conference Board of Canada in collaboration with Business Development Bank of Canada.

“Profits will rebound this year in four of the six industries covered in this outlook,” said Michael Burt, associate director, industrial economic trends.

“The other two industries — transportation and warehousing, and food and beverage manufacturing — can expect slight declines in profits in 2010,” Burt said.

“Weaker economic growth in the second half of 2010 will dampen profitability in 2011 for most of the industries covered.”

Despite signs of recovery, entrepreneurs have had difficulty accessing working capital and the BDC has responded by increasing its financing activities, said BDC vice-president Jerome Nycz.

“BDC loans to the accommodation sector increased by 55% in fiscal 2010 compared to fiscal 2009,” Nycz said.

“We also took the initiative and promoted an economic recovery loans program from July to October.”

By sector, the report found:

> Accommodation
Sales were up, occupancy rates are rising and prices have improved, producing a 24% increase in profits this year. In the first half of 2010, improved corporate profitability and strong employment growth led to more business and personal travel. Domestic travellers remained the main source of growth for the industry, as most other developed economies continue to struggle, and the high dollar made Canada a more expensive destination for international visitors.

> Food and Beverage Manufacturing
A stable domestic market and growing exports to emerging economies contributed to the industry’s expansion. But agricultural and energy prices are on the rise and this is expected to lead to a modest correction in industry profits this year and next.

>Food ServicesWith strong job creation occurring in the first half of 2010, consumers started returning to restaurants and spent more dining out. Full-service restaurants bore the brunt of the recession’s effects and sales in this segment are proving slow to recover. However, rising sales and price increases will allow industry profits to recover to their pre-recession peak of $1.3 billion in 2010.

>Retail TradeSales rebounded in the first half of the year, but recent fears of slowing economic activity have led to a pause in retail spending growth. Retailers of durable goods — such as furniture, electronics, and motor vehicles — suffered the largest declines during the recession and many have not fully recovered. Sales growth is expected to resume in the coming months. These gains, combined with cost savings from the strong Canadian dollar, will help industry profits to reach a new high of $12.8 billion in 2010.

>Transportation and Warehousing
International trade activity has rebounded, boosting demand for transportation