Hit the Bottom
At least one major forecaster is suggesting Saskatchewan’s economic slowdown is more pronounced than we had previously thought.
The economics unit at TD Bank released its provincial update about ten days ago with a forecast that Saskatchewan’s economy will contract by eight-tenths of a percentage point this year. That is the darkest forecast yet.
It says the drag created by lower oil prices will cut more deeply than other economists have forecast. However, they note that will be offset by increased potash production and the arrival of the Cigar Lake uranium mine.
Looking ahead, however, the TD forecast is one of the brighter. They are targeting expansion of 1.7 percent in the near 24 months, not what we got used to at the beginning of this decade but a further indicator that this year is the bottom of the dip on the charts.
They also expect housing prices to soften next as over-supply is gradually absorbed with new home construction unlikely to begin increasing until 2017, when the resale market signals growing demand with prices starting to climb again.
The month of August was a solid one for those who sell supplies to the agricultural sector.
This province’s wholesale businesses enjoyed a significant uptick in that month – the biggest increase in the country actually. Revenues for these enterprises were nearly 13-percent higher than in the same month a year ago. And it was up nearly 10-percent over the previous month.
The big contributor was agricultural supplies.
That was the first improvement these businesses saw in eight months. And while one month does not make a trend, it is the first sign that the downturn has bottomed out.
To put this shift into context, six provinces saw declines in this sector. Manitoba got the same lift from the farm supply sector which may be a signal of better expectations for this year’s grain crop.
Often wholesale activity is a precursor or indicator of where retail sales will be in the next month or two as these products find their way to stores shelves where consumers can get at them.
Not as Glamorous as You’d Think
Owning a business is growing in popularity these days …say a restaurant or bar.
First of all, being in business is not easy. It involves financial risk, long hours and challenges with meeting the expectations of customers and employees.
So this might help you if you’re thinking there’s a place for you in the hospitality sector. StatsCan has just issued a compilation of data on the food and liquor business for 2013. Yes, it’s a year-and-a-half old but it provides some remarkable insights into just tough this business can be.
First of all, the operating profit on full service restaurants, fast food outlets or taverns runs somewhere between 7 and 9 per cent in Saskatchewan. Out of that, the owner has to pay taxes, leaving them somewhere between three and five percent of gross sales as the reward for taking all the risk and being the owner. To put it another way, you’d have to gross close to three-quarters of a million dollars a year to make the minimum wage.
Dollar Doesn’t Do It
The falling Canadian dollar is generally viewed as a good thing for manufacturers in this country. We export a big percentage of what we process so a depreciating currency should provide something of a boost when we convert from sales in American dollars back to Canadian.
However, there is one other factor we have to take into account in this scenario. That’s whether sales in a slowing global economy are actually dropping faster than the currency.
It would appear that is exactly what’s happening these days. The latest manufacturing figures show Saskatchewan posted nearly an 11-percent decline in the past year. It was virtually unchanged through the summer with the latest numbers coming from August, however, we have followed the Canadian trend where the overall value of our manufactured goods slipped.
Several other provinces saw steeper reductions reinforcing the idea that even a falling currency is not enough to compensate for slowing demand. The one positive in all this, though, is that inventories of petroleum products declined as demand for oil is holding its own.
Paul Martin You’ve heard him on the radio, seen him on TV and read him in newspapers and magazines. Paul is a popular keynote speaker on topics ranging from the economy to tapping community potential. His unique blend of communication and business knowledge has made him a highly sought-after consultant. As the Chair of Martin Charlton Communications, Paul is MCC’s ‘go to’ guy for all things business in Saskatchewan. He is the chair of four Saskatchewan branches of TEC (The Executive Committee) – a global organization dedicated to improving the performance and enhancing the lives of CEOs – which has over 50 CEOs and senior executives among its Saskatchewan members. The long and short: Paul knows the province’s corporate community and business economy like few others. He is a potent conduit for anyone looking to do business in Saskatchewan, Canada’s fastest growing economy. His strategic advice is unrivalled.