CORPORATE PROFITS –

CANADA – 3Q16PAUL YOUNG, CPA, CGA

DATE: DECEMBER 4, 2016

DESCRIPTION

• THIS PRESENTATION DISCUSSES CORPORATE PROFITS AND THE HEALTH OF THE PRIVATE SECTOR IN CANADA

AGENDA• SUMMARY • CORPORATE PROFITS / CANADA• JOB CREATION • PRODUCTIVITY• BUSINESS INVESTMENT

SUMMARY / CORPORATE PROFITS• CANADIAN CORPORATIONS EARNED $80.7 BILLION IN OPERATING PROFITS IN THE THIRD QUARTER, UP 14.0% FROM THE PREVIOUS

QUARTER. THE INCREASE WAS LED BY A $6.5 BILLION GAIN IN PROFITS IN FINANCE AND INSURANCE INDUSTRIES. ON A YEAR-OVER-YEAR BASIS, OVERALL OPERATING PROFITS FOR CANADIAN CORPORATIONS WERE DOWN 1.1% COMPARED WITH THE THIRD QUARTER OF 2015. SOURCE – STATS CANADA • OPERATING PROFITS WERE UP 27.1% TO $12.7 BILLION IN MANUFACTURING. OPERATING PROFITS ROSE IN 9 OF 13

MANUFACTURING INDUSTRIES. MOST OF THAT GROWTH CAME FROM PETROLEUM AND COAL PRODUCTS MANUFACTURING. PETROLEUM AND COAL PRODUCTS MANUFACTURING POSTED AN OPERATING PROFIT OF $1.2 BILLION IN THE THIRD QUARTER, FOLLOWING• AN OPERATING LOSS OF $0.8 BILLION IN THE SECOND QUARTER. ACCORDING TO DATA FROM THE CRUDE OIL AND NATURAL GAS

SUPPLY AND DISPOSITION RELEASE IN THE DAILY, CANADIAN OIL AND GAS PRODUCTION WAS DOWN IN THE SECOND QUARTER DUE TO THE FORT MCMURRAY FIRES IN MAY. AS A RESULT, REFINERIES WERE RECEIVING LESS OIL FROM DOMESTIC PRODUCTION, WHICH AFFECTED THEIR OPERATIONS. WITH THE RESUMPTION OF PRODUCTION IN FORT MCMURRAY, OPERATING PROFITS IN PETROLEUM AND COAL PRODUCTS MANUFACTURING REBOUNDED IN THE THIRD QUARTER.• EXCLUDING PETROLEUM AND COAL PRODUCTS MANUFACTURING, OPERATING PROFITS ROSE 6.8% TO $11.5 BILLION, WITH THE

LARGEST INCREASE IN FOOD AND SOFT DRINK MANUFACTURING. OPERATING PROFITS IN WHOLESALE TRADE ROSE 3.4% TO $5.8 BILLION, WITH MOST OF THE GROWTH IN FOOD, BEVERAGE, TOBACCO AND FARM PRODUCT WHOLESALERS AND, TO A LESSER EXTENT, MACHINERY AND EQUIPMENT WHOLESALERS. INFORMATION AND CULTURAL INDUSTRIES REPORTED THAT OPERATING PROFITS WERE UP 7.1% TO $4.5 BILLION IN THE THIRD QUARTER

COMMENTS• THE BOUNCE BACK IN CORPORATE PROFITS WAS EXPECTED, GIVEN THAT THE ADVERSE IMPACT

FROM THE ALBERTA WILD FIRES HAS ABATED. THIS IS IN LINE WITH THE REBOUND IN ECONOMIC ACTIVITY DURING THE QUARTER, WHICH IS EXPECTED TO COME IN AT AROUND 3% ANNUALIZED. • PROFITS SHOULD CONTINUE TO GROW OVER THE REMAINDER OF THE YEAR AS A HEALTHY U.S.

ECONOMY AND WEAK CANADIAN DOLLAR HELP TO LIFT EXPORTS. GENERALLY HIGHER COMMODITY PRICES DURING THE FOURTH QUARTER SHOULD ALSO GIVE REVENUES A BOOST. • THAT SAID, FURTHER OUT, THE OUTLOOK HAS BEEN CLOUDED BY THE OUTCOME OF THE U.S.

ELECTION, AS PRO-GROWTH POLICIES COULD SUSTAIN CANADIAN DEMAND AND PROFITS, BUT INCREASED PROTECTIONISM IN THE U.S. COULD HAVE THE OPPOSITE IMPACT. • SOURCE – TD ECONOMICS

COMMENTS• “THE LATEST CORPORATE PROFIT FIGURES SHOW THAT, DESPITE THE

ENERGY-RELATED REBOUND IN THE THIRD-QUARTER, THE ECONOMY ISN’T OUT OF THE WOODS YET. WHILE HIGHER OIL PRICES IN THE SHORT TERM WILL HELP THE ENERGY SECTOR GRADUALLY RECOVER, A SLOWER PACE OF HOUSEHOLD BORROWING WILL CONTINUE TO SLOW PROFIT GROWTH IN OTHER KEY SECTORS, CONSISTENT WITH A GENERALLY SLUGGISH ECONOMY OVERALL”SOURCE - HTTPS://WWW.CAPITALECONOMICS.COM/CANADA-ECONOMICS/CANADA-ECONOMICS-WEEKLY/CORPORATE-PROFITS-STILL-POINT-TO-SLUGGISH-ECONOMY-38317/

QUARTERLY PROFIT

JOB CREATION / PRIVATE SECTOR

Source – Stats Canada

PRODUCTIVITY

Source – Stats Canada

BUSINESS INVESTMENT

Source – Stats Canada