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New Canadian manufacturing sector "rising from the ashes": CIBC

Surviving firms are stronger, leaner and more productive

TORONTO, April 1, 2014 /CNW/ - After a difficult decade that saw the number of Canadian manufacturing firms fall by 20 per cent and the sector's share of GDP drop to 12 per cent, a new report from CIBC World Markets finds that many industries are ready to reverse that trend and outperform in the coming years.

"A different manufacturing sector is rising from the ashes," says Benjamin Tal, Deputy Chief Economist at CIBC. "Though some failed to survive, many who did are stronger, leaner and more productive. The long and painful adjustment is starting to pay off, with many industries better positioned to take advantage of the weaker dollar to regain positions in U.S. markets and to better integrate into global supply chain opportunities."

The report, co-authored by Mr. Tal and CIBC Economist, Nick Exarhos, notes that Canadian manufacturing has seen dramatic ups and downs over the past 25 years. In the 1990s, when a tumbling loonie lost over 20 per cent of its value, Canada's manufacturing share of GDP rose dramatically, counter to the trend in other western nations that increasingly saw manufacturing shift to emerging-market countries.

"Only when the Canadian dollar started its march back to, and through, parity at the turn of the new millennium, did the adjustment arrive in Canada," says Mr. Tal. "Canadian manufacturing saw a nose-dive—capped off by the Great Recession—from the relatively elevated levels it had seen in the previous two decades."

With currency and market conditions improving, the two economists analyzed the sector in order to rank which industries, based on their market characteristics and actions taken during the dark days of the last decade, have best adapted and are poised to outperform in the coming years.

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