While the economy is improving and business demand for computer and electronic equipment is picking-up, a high Canadian dollar and poor U.S. consumer confidence mean recovery for Canada’s computer manufacturing industry likely won’t be seen until 2011.
That’s the conclusion of the Conference Board of Canada‘s spring 2010 outlook for the Canadian computer and electronic product manufacturing industry is on a slow path back to its pre-recession performance, according to The Conference Board of Canada’s Spring 2010 outlook on the industry.
“Last year, the industry experienced its first decline in profit levels since the tech bust at the beginning of the 21st century,” said Maxim Armstrong, an economist for the Conference Board of Canada. “Profits are expected to dip again this year, before a more sustained recovery takes hold beginning in 2011.”
A number of factors drive the forecast. A strong Canadian dollar will make our IT exports less competitive in global markets, and flagging consumer confidence, particularly in the United States, still has many delaying major purchases. Business confidence is somewhat higher in the U.S., with equipment spending expected to increase by 6.6 per cent in 2010. That still doesn’t compensate though for the 16.7 per cent drop experience in 2009.
“In 2010, production is expected to rebound modestly as demand improves and excess inventory is moved. However, costs are forecast to grow faster than revenues, leading to a further reduction in profits, to $1.4 billion,” writes the Conference Board. “In 2011, healthier corporate profitability and consumer confidence are expected to lead to a strong rebound in production and a return to profit growth.”
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