Canadian corporations continued to report record earnings in the first quarter of 2005, Statistics Canada said today.

Operating profits rose 3.4% to $51.5 billion, following a similar increase in the fourth quarter of last year.

StatsCan said profits have risen in all but two of the last 13 quarters, following a slip in 2001.

The government agency said non-financial industries saw operating profits improve by 2.7% to $38.7 billion, led by gains in oil and gas, telecommunications and retail.

Meanwhile, financial industries, led by the chartered banks, earned $12.8 billion in first quarter operating profits, a 5.9% increase from the fourth quarter of 2004.

Insurance companies lost ground as profits fell 6.1%. While life insurers earned $1.0 billion in operating profits, a 4.2% improvement from the fourth quarter, property and casualty insurers saw profits drop 12.4% to $1.6 billion from record high earnings in the fourth quarter of 2004.

Oil and gas companies reaped the benefits of higher prices in the first quarter, as operating profits rose 5.8% to $6.3 billion. Average crude oil prices were up 6.4% from the fourth quarter of 2004, and 35.5 higher than in the first quarter of 2004.

Mining companies also gained ground in the quarter, demand for metals rose, in some cases to the highest levels in a decade.

Operating profits of the information and cultural sector reached $2.5 billion in the first quarter, a 14.2% improvement from the previous quarter. The telecommunications companies led the way, with profits up 15.4%.

Overall retail profits were up 6.4% to a record high $3.3 billion.

Manufacturing profits improved marginally in the first quarter, following declines in the preceding two quarters. First quarter profits of $11.0 billion were 1.2% above fourth quarter levels, but remained below the recent high of $12.5 billion earned in the second quarter of 2004.

Despite the recording earnings, economists suggest that corporate profits may have peaked.

“Operating profits were at a record high in Q1. Will that trend continue? We doubt it very much,” National Bank Financial says in a research note.

“Financials profits are probably at peak levels due to cyclically low loan loss provisions. As for nonfinancials, the impetus in the last few quarters came from mining and oil & gas. Outside these two resource sectors, operating profits were essentially flat. This impression holds for the manufacturing sector, whose operating margin (excluding petroleum & coal products) has been at best flat in the last three quarters,” NBF says. “Looking ahead, we expect softer commodity prices to put downward pressure on profits in the coming months.”

“This is more good news for business credit quality in Canada, although conditions are likely near a peak,” notes RBC Economics. “The increase in earnings does point to firming wage growth and, therefore, price pressures, but the pace of increase does not appear out of step with growth in the overall economy. Given last week’s softer-than-expected read on core inflation, the Bank of Canada is not expected to raise rates until fourth quarter.”