MRO Magazine

News

April Survey of Manufacturing shows decline in shipments

Ottawa, ON -- Despite a boost from price increases for petroleum products and primary metals, manufacturing shipmen...


Ottawa, ON — Despite a boost from price increases for petroleum products and primary metals, manufacturing shipments declined in April 2006, losing most of March’s gains, reports Statistics Canada.

A substantial drop in the production of aerospace products and parts was largely behind April’s 1.5% decrease in shipments which stood at $50.4 billion. This was the third decline so far in 2006, and followed March’s 1.6% advance in shipments. Excluding the aerospace industry, shipments were down a more modest 0.4%.

The sharp drop in shipments boosted the inventory-to-shipment ratio to 1.31 in April, equal to the ratio’s recent high set in February.

Uncertainty in the manufacturing sector, due in part to the strengthened value of the Canadian dollar and soaring input costs, have contributed to some weakness in shipment activity. As a result, the trend of the inventory-to-shipment ratio has been on a gradual, upward movement over the last few months.

The inventory-to-shipment ratio is a key measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.

A COOL START TO SPRING

In April, two-thirds of the manufacturing industries, accounting for 66% of total shipments, posted declines. Both the durable (-1.8%) and nondurable goods (-1.1%) sectors recorded lower shipments for the month.

A quarter-end boost in production in March by some aerospace manufacturers led to a larger than normal drop in production in April. Production of aerospace products and parts fell 37.8% to $892 million in April, following last month’s 38.2% surge. Despite the decline, a gradual recovery in global demand for aircraft and parts has fuelled growth in Canada’s aerospace industry compared to last year.

Food manufacturers also reported wide ranging declines, as shipments tumbled 4.2% to $5.6 billion. Decreases were extensive and included the dairy products, grain and oilseed milling and meat products industries.

The fabricated metal products industry also registered a 3.4% drop in shipments to $3.1 billion, following some big orders shipped in recent months.

SHIPMENTS FALL DESPITE PRICE HIKES FOR GAS AND METALS

In spite of strong demand and sky-high prices for primary metals and petroleum, the strength of these industries only partly offset the overall decline in shipments for April.

Soaring prices contributed to a 5.5% jump in shipments of primary metals to $4.4 billion. Robust demand and low inventories for certain metals, including copper, zinc and nickel, have driven up prices in recent months. The industrial price index of primary metals has risen 13% since December, soaring 6.4% in April alone.

Motor vehicle shipments increased 2.7% to $5.3 billion in April, following a 6.8% decline in March due to temporary plant closures. Notwithstanding April’s gain, the auto sector continues to struggle with a range of challenges from weakening retail sales in North America, to rising interest rates and high consumer debt in the United States. Year-to-date shipments of motor vehicles were down 9.5% in the first four months of 2006 compared to the same period in 2005.

April saw the return of record high prices for petroleum products. By mid-month, the price of crude oil exceeded $73 US per barrel, surpassing its previous apex in September 2005. Unease regarding supply as the summer driving season fast approaches, coupled with global tensions concerning Iran and other oil-producing regions have contributed to the recent price speculation. Petroleum shipments rose 2.6% to $4.9 billion in April and might have been higher but temporary refinery shutdowns largely counterbalanced the 9.6% spike in petroleum prices.

MANUFACTURERS PRODUCE LESS IN APRIL

The volume of goods shipped also fell for the third time in the last four months. At 1997 prices, shipments dropped 1.4% to $46.8 billion.

Notwithstanding the many challenges of the last year, manufacturers have held their own as the volumes of goods shipped remained relatively stable over the last 12 months. That said, these challenges may have eroded opportunities for market expansion and employment growth. Constant dollar shipments for the period January-to-April 2006 were essentially unchanged with that of the same period last year.

Quebec and Alberta were among the seven provinces and the Yukon to post lower shipments in April. Big declines in aerospace production coupled with the food and wood products industries pulled down shipments in Quebec by $393 million (-3.1%) to $12.1 billion.

The machinery and chemical products industries contributed to the relatively widespread decreases among Alberta’s manufacturers. Shipments fell by $164 million (-3.1%) to $5.1 billion in Alberta, marking the third decrease in the last four months by the province’s manufacturers.