Outlook shows manufacturing held back by supply chain disruptions

Canadian manufacturers are being held back in their contributions to economic recovery by continuing supply chain disruptions and labour shortages.

A new forecast by the Canadian Manufacturers & Exporters (CME) shows that along with the lingering impact of the pandemic, Russia’s unprovoked invasion of Ukraine will prolong supply chain disruptions and keep inflation elevated for longer than previously expected, continuing to weigh on the manufacturing sector’s near-term growth prospects.

After reaching 4.5 percent in 2021, real manufacturing output growth is forecast to slow to 3.5 percent in 2022 and to 3.2 percent in 2023.

After bouncing back with an impressive 4.6 percent gain in 2021, Canada’s economy is expected to grow by an additional 4.2 percent this year and 2.7 percent next year.

Looking beyond these near-term challenges, Canada is headed for a long-term future of low growth and stagnant living standards unless it reverses years of weak investment and lacklustre productivity growth.

“By most measures, Canada’s recovery from the pandemic has been impressive, but now is not the time to be complacent,” said Dennis Darby, CME president and CEO.

“If we do not address the country’s long-term challenges, the economy will soon return to its previous slow growth path.”

Darby notes that it doesn’t have to be this way as Canada has an enormous opportunity to ensure long-term prosperity by winning back manufacturing investment from firms looking to shorten supply chains and reshore production.

“Clearly, there has never been a better time for governments to partner with industry to build a more vibrant and resilient Canadian manufacturing sector,” added Darby.

The manufacturing sector represents more than 10 percent of Canada’s gross domestic product. Total manufacturing sales in 2019 surpassed $685 B.