A bad first quarter for Canada’s economy—with one bright spot

In the second consecutive quarter showing a sharp drop in corporate profits, the auto sector looked up a bit

Auto manufacturing robots

(Christopher Furlong/Getty)

Canadian corporations earned $75.4 billion in operating profits in the first quarter, down 6.0% from the previous quarter, and 9.3% from the same quarter last year. Overall profits declined in 12 of 22 industries (see quarterly operating profits chart below), according to Statistics Canada:

Chart showing Canadian corporate operating profits since Q1-2010


That’s a sharp decline in two quarters, in large part attributable to the drop in oil prices, the effects of which are still working their way through company balance sheets. Though it was a bad quarter overall, the one surprise was a return to relative health for the auto industry. Here are the highlights:

  • Motor vehicles and parts manufacturers saw a nice bounce back this quarter. Profits increased 58.2% to $1.3 billion, as manufacturers moved past fourth quarter’s recall issues.
  • Oil and gas extraction showed the biggest drop in all sectors as it declined for the fourth consecutive quarter due to the drop in crude oil price. Profits fell 129% from the previous quarter, resulting in a $631 million loss in the first quarter.
  • Petroleum and coal products manufacturing also exhibited a significant $2.1 billion decline, ending in $944 million, the lowest level in five years.
  • In the financial sector, operating profits fell 0.2% to $19.7 billion in the first quarter. Profits from insurance companies dropped $933 million as a result of higher actuarial liability expenses from life, health and medical insurers, while profits in banks and credit unions increased 11.2% to $10.7 billion as a result of higher revenue from derivative trading.
Chart showing comparative performance of energy, petroleum and auto sectors for Q1-2015