OTTAWA (Reuters) - Signs of a U.S. economic comeback lifted the outlook for Canadian corporate profitability in December and January, halting a five-month slide, a report by the Conference Board of Canada said on Tuesday.
The research organization’s leading indicator of industry profitability index climbed 0.04 percent in December and 0.07 percent in January, according to revised figures.
“Although the overall index has yet to suggest a strong rebound in corporate profitability, the January numbers mark the most encouraging showing since last spring,” the Conference Board said in its report.
Stronger U.S. economic growth and employment appear to have triggered the turnaround, the board said.
The index looks at high-frequency economic data across 49 sectors and is designed to predict turning points in profitability three to six months hence.
The biggest jump in profitability in January was in the oil extraction industry, followed by banking.
Only 17 of the 49 industries showed a decline, the lowest number in six months. The biggest drop was in gas extraction, followed by paper products.
An expanding U.S. economy bodes particularly well for highly export-reliant industries such as chemicals and lumber, two sectors with strong prospects in coming months, the board said.
On the downside, the lingering uncertainty about the European debt crisis and high levels of household debt in Canada are preventing the profitability index from rising more substantially, the report said.
The Conference Board of Canada is independent of, but affiliated with, the Conference Board in the United States.
Reporting By Louise Egan; Editing by Peter Galloway