Conference Board of Canada sees weakening corporate profitability in Canada over the next six months

The Conference Board of Canada is suggesting a weakening of corporate profitability in Canada over the next six months.
The conference board bases its observation on the fact that its Leading Indicator of Industry Profitability declined in July for the first time in almost a year. The July result is based on average data obtained before the global financial turbulence earlier this month.
The proprietary indicator is part of the conference board’s Industrial Economic Trends service, and is designed to predict future movements in corporate profitability.
A leading indicator is created for the economy as a whole, as well as for 49 sectors within the economy, covering most of the private business activity that takes place in Canada.
Service industries such as insurance and real estate saw decreases in their indices in July, the conference board noted. Overall, of the 49 industries covered, 18 recorded a drop in their indices in July, the highest number since the fall of 2009.
“Factors include lower returns on investment portfolios as a result of the declining stock market, and weakening consumer spending due to rising debt burdens and declining confidence.”
Supply chain disruptions also played a part in the leading indicator’s decline.
“The dismal economic recovery south of the border, as well as supply-chain disruptions linked to the Japanese earthquake and the dampening effects of rising inflation on consumer spending have all contributed to the deteriorating profitability outlook,” said economist Lin Ai.