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Canadian companies must meet challenges with investment, innovation |
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Investing in new machinery and implementing innovative solutions will be critical for Canadian companies to achieve success as the economy slowly improves, according to a recent report from TD Economics.
“An economic recovery has taken hold in Canada, but the pace of
economic growth will remain subdued. That means businesses will
continue to face a fiercely competitive and challenging environment.
“Exporters will struggle with a strong Canadian dollar and only
gradually improving U.S. demand. Domestic companies will face more
competition from foreign imports from countries with lower labour costs
and/or weaker currencies. And, domestic demand will likely prove
moderate in 2010 and 2011,” the report warns.
Against this bleak backdrop, TD Economics stresses that Canadian
businesses must consider every possible option to boost efficiency,
constrain costs and improve margins.
“Additional invest¬ment in machinery and equipment, particularly
the deployment of new innovations, could prove a key ingredient for
success. The good news is that a host of factors make now a good time
to make such investments. Borrowing costs are low, credit is
accessible, profit growth will gradually recover and the strong
Canadian dollar is making it cheaper for firms to purchase imported
equipment.
“Greater investment in new capital would reap benefits for both
individual companies and the economy as a whole. Indeed, additional
investment could help to address Canada’s abysmal productivity
performance in recent years, which is one of the country’s most
pressing problems,” according to TD Economics.
Continues the report, “Canada severely lags our international
peers in productivity and this gap is a major hindrance when competing
in export markets, since the most productive producers are most able to
win market share and grow their business.
“As of 2008, Canada’s business-sector productivity had fallen to
72% of the U.S. business sector output per hour. During the past
decade, slumping productivity growth rates in the manufacturing and
resource sectors were the largest contributors to this growing overall
productivity gap. Moreover, productivity of the Canadian manufacturing
industry grew much slower during the last decade than did that of U.S.
manufacturing.”
Obviously, even though the recovery is underway that doesn’t mean
that Canadian manufacturers aren’t still facing the same challenges
that were there prior to the downturn.
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