If you've as much as glanced at a Canadian economic growth forecast in recent weeks, you're likely well aware that 2016 isn't expected to be a booming year. Yet, despite this less-than-ideal news, the majority of Canadian manufacturers continue to be cautiously optimistic about the year ahead.
In Manufacturers' Outlook 2016—a report published recently by PLANT magazine and sponsored by Grant Thornton LLP—32 percent of the manufacturers interviewed said they were downright optimistic about the year ahead, while another 58 percent said they were cautiously so. And while these business owners and executives are the first to admit they will face their fair share of challenges this year—most notably around costs, pricing, sales and the Loonie—they're nevertheless upbeat.
So why are Canadian manufacturers willing to look past the doom and gloom in the media and see the glass as half full?
New trade agreements
The Trans-Pacific Partnership—a new free trade agreement involving 12 countries from Chile to Japan—will undoubtedly create increased competition for Canadian manufacturers as it allows other countries to gain tariff-free access to the Canadian and the US market. That being said, this trade agreement, when it is implemented—in addition to new agreements with Europe and South Korea—will also provide Canadian manufacturers with significant new market opportunities, including improved access to the large Japanese automotive market.
Even with greater access to new markets, many manufacturers will continue doing business with companies south of the border—because of geographical proximity, a familiarity with the US market, similar consumer tastes and a host of other reasons. These manufacturers are well aware that the US economy is forecasted to grow by almost three percent in 2016—and that, combined with the low Loonie, is something to look forward to for Canadian exporters.
Other economies are growing, too
It's true, global growth isn't anticipated to be extremely high in 2016—it's likely to sit around three percent rather than an ideal four or five percent—but it's still better than North American projections. And while emerging economies aren't growing as fast as many would like, they're continuing to grow at quite a decent clip. China, for example, is forecasted to experience five to six percent growth in 2016. Unlike in the past, China is no longer considered mainly as a supplier of goods to the rest of the world. It is now very much a consumer of the world's products as well. The country's emerging middle class consists of hundreds of millions of consumers—consumers who have money and a taste for the finer things in life, including high-quality Canadian-made products.
The rise of Canadian non-resource exports
More than 15 percent of manufactured machinery and equipment has historically gone to the oil and gas sector. With the recent drop in oil and gas capital expenditures, these orders and shipments have dropped by approximately 40 percent. On the bright side however, non-resource Canadian exports have picked up significantly in recent months, particularly in the automotive sector. Automotive exports now lead the charge across the country, exceeding oil and gas exports for the first time since 2007.
While no one can truly predict what lies ahead in the coming months, there's something to be said for looking on the bright side. By identifying your ideal path—and establishing a sound growth strategy to direct you—you can quite effectively turn optimism into opportunism in 2016.
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