Canadian Manufacturers May Be Overly Optimistic About The Future Says New Global Study
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Global Study Shows The Backbone Industry Of Canada’s Economy Is Approaching A Crossroad
Despite the strong Canadian dollar and the rising
costs of doing business, Canadian mid-sized manufacturing companies are
optimistic about what the future holds, according to a new study released
today by Grant Thornton LLP. Over 100 Canadian mid-sized manufacturers and
900 mid-sized manufacturers from 9 other countries were surveyed to compile
Manufacturing Insights 2005: A Global Comparison.
“On the surface, the Canadian results seem surprisingly encouraging, but
in the context of the overall report, the findings suggest that Canadian
mid-sized manufacturers may have some challenges ahead,” explained Bruce
Byford, national manufacturing and distribution sector leader, Grant Thornton
LLP. “In order to keep up the momentum of the past few years, Canadian
manufacturers must be prepared for these challenges and the related
opportunities that will no doubt arise.”
Manufacturing Insights 2005: A Global Comparison identifies that while
81% of Canadian mid-sized manufacturers report being optimistic about the
economic outlook, the data from other responding countries suggests that there
are warning signs. For example, Mexico (61%), U.K. (57%), and Russia (37%),
also reported lower levels of optimism. Only three in five (63%) of U.S.
respondents were found to be ‘slightly optimistic’, and no U.S. respondents
reported being ‘very optimistic’.
“With Canadian manufacturers so dependent on the health of the US
economy, they can’t afford to ignore the fact that U.S. respondents are
indicating that there may be tough times coming,” cautioned Byford.
It is common knowledge that the U.S. is Canada’s largest trading partner,
with over 80% of Canadian manufacturing exports going across the border. But
China is quickly encroaching on Canada’s position as the United States’
largest partner in trade. In fact, if auto industry exports are not included,
China would currently be the U.S.’s largest trading partner.
Interestingly, other mid-sized manufacturers found to be less optimistic
about the future are those in Singapore (68%), Hong Kong (65%) and Taiwan
(37%), all countries that neighbour China.
“China and India seem to be having a significant impact on neighbouring
economies,” explained Byford. “Although many perceive China and India as
threats, there is also an opportunity for Canadian manufacturers to take
advantage of these booming economies. With a combined population of over
2 billion people in China and India, it is safe to say that this may be the
most significant growth opportunity facing Canadian manufacturers in recent
times.”
The report also found that 45% of Canadian manufacturers surveyed plan on
increasing their workforce in 2005, and just over half (55%) expect to
increase investment in plant and machinery.
“Interest rates are low and the Canadian dollar is strong in relation to
the U.S. – these conditions make investment in technology, machinery and
growth more affordable,” said Byford. “But Canadian manufacturers should also
look within their organizations to determine how they can increase
productivity without capital investment by improving processes, management
systems and management techniques.”
According to the report, only 33% of Canadian
respondents reported feeling stressed, second only to India (31%). Canadian
mid-sized manufacturers have performed well over the past few years by
remaining flexible and adapting to challenges like SARS, Mad Cow disease and
the weakening U.S. dollar.
“Success and low stress levels in spite of these challenges, is a real
testament to the resiliency of Canadian manufacturers,” said Byford. “But
Canadian manufacturers need to look ahead to the future and consider, for
example, which countries might have the largest economies in the world – five,
10 or 20 years down the road. Now is the time to diversify trading partners
and consider the redeployment of operations globally to take advantage of
these market opportunities.”
@ May 24, 2005