As we look for signs of the expected economic slowdown, the income statements of Canadian corporations should be a good source of clues.

To this end, new data from Statistics Canada show that “macroeconomic headwinds drove down the net income before taxes [of Canadian enterprises] in the first quarter” of 2023.

On a seasonally-adjusted basis, total net income before taxes (NIBT) was down by $9.8 billion (-5.6%) compared to the previous quarter.

This seems like a sign that the economy was cooling down at the start of 2023.

However, because the recent quarterly data have not coalesced into a recognizable trend, but instead, have bounced around (NIBT was down in the first quarter of last year, up in the second, down in the third, up again in the fourth, and now down again to start 2023), it is not pointing to what to expect going forward.

The numbers are interesting, but are an example of information that does not really tell us what we want to know; in this case, what is the overall direction of the economy and what’s next for corporate earnings.

With that said, there were some notable differences in NIBT by industry in the first quarter.

Oil and gas extraction and support services, for example, saw its NIBT fall by 24.9% in the first quarter to $10.3 billion—the third drop in a row. Statistics Canada attributes the decrease to lower oil prices.

Another critically important sector of the Canadian economy—auto manufacturing*—saw its NIBT contract by 65% in the first quarter to $366 million. In this case, Statistics Canada attributes the decrease to higher expenses.

Finally, the finance and insurance sector’s NIBT fell by 11.3% to $46.5 billion in the first quarter. Why? There are too many moving parts to pinpoint an answer.

Unfortunately, as with overall corporate NIBT, the recent quarterly ups and downs in these sectors make it difficult to tease out a pattern going forward and is another reminder that more data does not always mean more insight.

*Motor vehicle and trailer manufacturing with motor vehicle parts manufacturing

Answer to the previous trivia question: Construction of Alberta's Government House began in 1912 and it was officially opened October 7, 1913.

Today’s trivia question: Who hit his 714th (and final) home run on May 25, 1935?