MISSISSAUGA, ONTARIO (Jan. 13, 10:30 a.m. EST) — Canada's plastics processing industry should continue to expand in 2003, forecasters say.
For decades, the industry has grown faster than Canada's gross national product. Forecasters predict the country's GNP will rise 3-4.2 percent this year. The GNP increased 3.5 percent in 2002, estimated Jayson Myers, chief economist for the Canadian Manufacturing and Exporting Association of Mississauga.
Processed plastic shipments were up 9 percent in the first three quarters of 2002, making it the fastest-growing manufacturing sector, according to Faris Shammas, economist and vice president of the Canadian Plastics Industry Association. Some of the fastest-growing plastics categories were film, sheet and bags, up 13.4 percent, and pipe products, up 13.1 percent.
Canada's plastics processors registered shipments worth C$32.2 billion (US$20.8 million) in 2001, and employ more than 140,000.
Materials replacement continues to be important fuel to the industry's growth. Shammas said in a telephone interview that the Kyoto Agreement to reduce greenhouse gases also might be a boon to plastics, since plastics' light weight reduces transportation loads. Low energy input in plastics manufacturing vs. other materials also could help to lower carbon dioxide emissions. Myers warns that Canada's economy faces fragile recovery because of global and domestic risks. Although domestic consumer spending and construction activity are relatively strong, “U.S. weakness is not good for Canadian manufacturers.” Two-thirds of the country's manufactured goods make their way to the United States. He does not foresee much strength in the United States until summer.
Profits for Canadian companies continue to be weak, threatening any increase in business investment, Myers added. House prices in major Canadian cities are on the rise and risk the amount of disposable income consumers have to spend on other goods. Canada's labor productivity is lagging further behind that in the United States, reducing competitiveness and putting downward pressure on the Canadian dollar, Myers stated in a position paper presented to Canada's federal government.
Consumer spending in Canada has been buoyed by stable, low interest rates. The Bank of Canada froze its overnight rate to 2.75 percent in early December. Toronto Dominion Bank economist Marc Levesque predicts the federal bank probably won't hike its rate until spring. Canada's GNP grew by 5.1 percent in the first half of 2002 but slowed to 3.1 percent in the third quarter.
Canada's dollar did not gain against its U.S. counterpart last year despite the country's healthy economic performance. In periods of geopolitical crisis, the Canadian buck loses value because investors shift to the U.S. dollar and gold. It started 2003 worth less than US$0.64.