Growth is beginning to return to Canada’s struggling manufacturing sector but difficulties in obtaining credit are threatening to stamp out what few green shoots are emerging, according to a new survey by Canadian Manufacturers and Exporters.
The survey of more than 700 manufacturers across the country revealed that only 38% have seen a decrease in orders compared to three months ago — a 12% improvement from 50% of companies that felt the pinch in September.
“The good news is that things seem to be stabilizing and orders are beginning to pick up a bit,” said Jayson Myers, president of CME. “But it’s still very patchy and very uncertain.”
On the job front, things are also looking much better in the manufacturing sector with 82% of companies reporting they expect to retain or hire people during the next three months.
That leaves only 24% of manufacturers who say they’re likely to cut jobs during the next quarter, a decline from the 44% and 42% of companies who said the same when the economy bottomed out in February and March.
“The freefall is over, luckily, but we’re scraping bottom right now and while the orders are trickling in, they’re not a steady stream yet,” said Myers.
Part of the problem is the availability of credit. The survey indicates 66% of manufacturers are having difficulty borrowing the money they need to take advantage of a rebound in demand.
This marks a small improvement from the 73% of companies who reported the same problem in July or the 77% who reported it in June, but Myers says the credi crunch threatenings the sector’s recovery.
Economists say there’s been a rebound in the availability of credit compared to where it was when the economy hit rock bottom in the spring, but money is still much harder to borrow compared to when it was “too available” and too easy to get just before the crash.
“It’s possible the demand for credit is rising faster than the availability of credit,” said Benjamin Tal, a senior economist with CIBC.
“There is a lot of pent-up demand for credit and a very conservative financial sector and that’s something we see at the end of every recession.”
peter.zimonjic@sunmedia.ca
