BDC says Ontario's automotive sector has bounced back Click image to enlargeCanada’s economic recovery is well underway and is outpacing the recovery of most developed nations, according to Pierre Cléroux, vice president of research and chief economist at Business Development Bank of Canada (BDC).

Cléroux, who made the comments at the Canadian Association of Mold makers annual general meeting, said that while we are indeed in the midst of a global recession, Canada’s manufacturing sector is poised for an encouraging year in 2021.

Global GDP growth forecast to take a 4.4 per cent dip in 2020—it’s first foray into negative territory in six years—Cléroux says a bounce back to 5.2 per cent global GDP growth is predicted for 2021.

“4.4 per cent doesn’t sound like a big number, but it’s actually worse than 2008-2009,” he said during the webinar meeting. “The Impact of covid19 has been severe around the world with almost every economy taking a hit, with the exception of China, which is going to have positive growth this year of about 1.8 per cent.”

BDC forecasts the U.S., Germany, Japan and Canada will all see contraction around five per cent, while some countries in Europe will see worse contraction – almost 10 per cent.

“The biggest concern right now is new COVID-19 cases in the U.S., which appears to be starting into a third wave of the virus as you look at the seven-day moving average of new cases-per-million people. So far their recovery has been good but if they can’t control the number of new cases it will slow down the economy.”

The Canadian Recovery

As of July 2020, BDC says Canada was at 94 per cent of its monthly GDP compared to pre-pandemic levels in February. In terms of jobs, we have recuperated 76 per cent of the three million jobs lost during the second quarter of 2020.

“We aren’t done yet, still down by 700,000 jobs but the initial recovery has been quite strong, with manufacturing at 99 per cent its employment level in February. It’s rare that you see Canada performing better than the U.S. but that’s actually what is going on right now, so our initial recovery has been stronger than expected,” said Cléroux.

Manufacturing in Ontario

Ontario’s economy has recuperated 96 per cent of its lost jobs, with the manufacturing sector actually employing more two per cent people than it did in February 2020, a result largely driven by the automotive sector.

During the lockdown, automotive manufacturing sales plummeted to $13 million, but as of August 2020 that rebounded to $4.4 billion, back to the pre-crisis levels. August numbers reveal that vehicles and automotive parts makers exported four per cent more than in February 2020.

Here's a look at the expected staggered recovery, by industryClick image to enlargeWhat’s Ahead

Cléroux warns that the rest of the recovery is going to take longer, because the pandemic is not over yet, consumers will remain cautious with their spending, business investments are down and key sectors such as aerospace, oil and resources will take longer to recover.

The current surge in cases, which is actually stronger now than at the beginning of the pandemic, could result in a broader lockdown and is the biggest concern about the full recovery.

He says that if everything goes well and Canada can control the second wave of the virus without closing the economy again, the Canadian economy will fully return to pre-crisis levels in the first quarter of 2022.

If we can’t control the virus and we must put portions of the economy back in lockdown, that could delay the recovery until 2023.

“The recovery depends on how we deal with the virus, that’s going to be critical,” cautions Cléroux. “Today, with the information we have, we are still optimistic and should be back at the beginning of 2022.”

IMTS 2018 a record breaker

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SMTCL invests in North American manufacturing

SMTCL is the latest machine tool builder to announce it's investing in manufacturing in North America.

Most recently, DMG MORI opened its manufacturing facility in Davis, CA. And Haas, which has always manufactured its machines in California at a 1 million sq ft facility, recently announced its intention to expand its facility to accommodate growing machine tool demand. Mazak Corp., which has been manufacturing in North America for 40 years, has expanded its manufacturing operations 15 times, most recently in 2012 with a 200,000 sq ft addition, increasing its total floor space to 800,000 sq ft.

SMTCL's COO Jerry McCarty says SMTCL, considered among the world's largest machine tool builders, will be manufacturing in the US by the end of 2015.

A manufacturing factory in North America will complement SMTCL's current manufacturing facilities in Europe (Germany) and Asia (China). "The United States was chosen because that is where our customers are and we know that we can find workers and vendors that have the dedication to quality that we need", McCarty stated in a press conference at IMTS earlier this week. "We will employ Americans and this facility will be managed by Americans. I can also tell you that although we will continue to use the world's best components in our machines, we will also use a number of local US vendors to provide contract machining, fabricating, and electronics."

The site of the new manufacturing facility has not been determined, but McCarty says SMTCL-Americas will begin manufacturing VMCs and expand with other products as the market dictates. 

SMTCL plans on purchasing or building a 100,000 square foot facility and employing between 100 to 120 employees. "We will need manufacturing engineers, machine assembly technicians, and service technicians, as well as purchasing, accounting, and general management professionals," said McCarty.

McCarty added that he hopes to be manufacturing in the US by the end of 2015. "These machines will be shipped to our customers in the United States, Canada, and Mexico and we look forward to helping our customers compete in the world economy."

SMTCL produces 80,000 machine tools each year and has revenues of $2.9 billion. The company has more than 300 products in its machine tool line-up.

SMTCL-Americas

 

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