Yahoo Finance Five Canadian industries on the rise and five on the decline in 2017
The twists and turns of 2016 did a number on the crystal balls but that hasn’t stopped the industry researchers at IBISWorld from parsing through last year’s data to identify the key trends that are apt to shape the Canadian markets in 2017.
Madeline Hurley, lead analyst of industry research at IBISWorld and an author of the company’s latest report on the growth of key Canadian industries, walked Yahoo Canada Finance through five sectors it’s optimistic about this year and five expected to decline.
Oil and Gas Field Services
A month and a half in, the oil and gas field services sector is already seeing a bit of a return to form. In January alone, the number of active oil and gas rigs was up 23.4 per cent compared to last year. Going forward, IBIS points to rebounding demand and tempered production as a result of the Organization of Petroleum Exporting Countries’ first production cut in eight years.
These two factors add up to a potential 21.5 per cent rise in the price of crude oil this year. Overall, IBIS expects the industry to see an 18.8 per cent spike in revenue, building to $38.8 billion in revenue for the industry this year.
E-Commerce and Online Auctions
“It’s happening everywhere… (the industry’s growth) is huge in the U.S. but it’s taken slower to pick up in Canada,” says Hurley. A lot of the growth in the e-commerce and online auctions sphere stems from the higher volume and broadening categories of what’s available online. “Plus more perks like free shipping, free returns… consumers like it because they can compare prices, it’s easier, they don’t have to spend the time going to the store.”
The changing attitude surrounding shopping online combined with the uptick in affluence amongst Canadians (IBIS estimates a 3.1 per cent increase in Canadian per capita disposable income) is expected to fuel growth in the sphere, ultimately cutting into brick and mortar shops. In 2017, revenue for the e-commerce and online auction industry are expected to increase 12.4 per cent compared to 11.5 per cent in 2016.
Software Publishing
With businesses and government agencies making up the lion’s share of sales in the software space, an expected 14.4 corporate profit increase (compared to 2016 5.6 per cent decrease) is a likely catalyst in the industry’s forecasted 5.9 per cent climb.
“More businesses are willing to invest in software and it’s become less costly,” explains Hurley. “(They realize) there’s a certain competitive advantage (to being) more efficient because of the software they’re using… whether it be time saved, higher security, better interface.”
Home Care Providers
No surprises here with Canada’s aging demographics, but IBIS does note that the “expiration of critical government funding has limited the pace of industry expansion” (referring to the Canada Health Accord which expired in 2014) opening the floor for industry operators. Although several of the provincial governments are still locking horns with the federal government over a new multi-year health accord, total industry revenue is expected to climb 6.1 per cent in 2017 alone.
Accounting Services
Steady growth in the accounting services sector is the byproduct of several favourable trends in Canada. One of the key areas of growth is the higher-margin advisory practices major Canadian accounting firms have made their calling card. According to IBIS estimates, corporate tax advisory and consulting services account for 13.8 per cent and 11.6 per cent of industry revenue, respectively and revenue for the industry as a whole is expected to jump 4.4 per cent in 2017.
“Rising demand for tax advisory services has been largely driven by Canada’s favorable nominal corporate tax rate of 26.0 per cent compared with 40.0 per cent – federal, state and local – in the United States, which has led to the emergence of corporate inversions,” says the report. “Navigating the complex tax laws associated with this relatively new phenomenon has increased demand for tax advisory services, especially for Canada’s largest accounting firms, which have a multinational presence.”
On the outs
But it’s not all good news. IBIS is less optimistic about the continued exodus of apparel makers offshore and the effect it’s having on the textile sector. Industry revenue is expected to slip 2.6 per cent while the number of industry operators will fall an estimated 4.3 per cent to 1,307 companies.
Office supply stores are also on the out, says Hurley. “A lot of companies are doing more things online instead of printing out a bunch of paper.” And online ordering is biting into the profits of brick and mortar spots like Staples. In 2017, spending on industry products and services is expected to decline 2.2 per cent.
Import penetration is also expected to kick the hardware manufacturing industry – things like hinges, handles, keys and locks for the construction, furniture and automotive sectors – driving industry revenue down 1.3 per cent in 2017.
Soda production is on the outs amid growing health concerns, says Hurley. “It’s been attributed somewhat to ‘ready to drink’ coffee and tea and bottled water (but) it’s really a shift towards more healthy options.” Ibis expects the industries revenue to shrink 0.9 per cent in 2017.
While the shoe and footwear manufacturing industry saw a bit of spike in favourable operating conditions fuelled by rising disposable income and the slipping Canadian dollar, an appreciation in the value of the Loonie is expected to buoy the attraction of low-cost imports, driving revenue for the industry down 0.4 per cent. Employment is expected to follow, declining 1.3 per cent to 1,493 workers.
