MRO Magazine

Manufacturing stats for October show higher shipments, more jobs

Ottawa, ON -- Dec. 23, 2002 -- Despite manufacturers reporting higher shipments in October 2002, which marked the f...


Industry

December 23, 2002
By MRO Magazine
MRO Magazine

Ottawa, ON — Dec. 23, 2002 — Despite manufacturers reporting higher shipments in October 2002, which marked the fourth consecutive monthly increase for the year, Statistics Canada reports that the pace slowed noticeably in recent months.

Manufacturing shipments for the month edged up 0.1% to $44.2 billion. Higher prices for petroleum and coal products, and a rebound in the wood products industry contributed to the increase. Shipments were at the highest level since May 2001.

The trend in shipments remained positive in October, but at a decelerating rate compared with earlier in 2002. October’s increase in shipments was concentrated in the non-durable goods sector. Manufacturers boosted shipments of non-durable goods 0.4% to $18.7 billion, the highest level since January 2001. Output of durable goods, which includes big-ticket products such as airplanes, machinery and computers, remained relatively stable at $25.6 billion. Durable goods industries are often referred to as a barometer of business and consumer confidence.

In October, 11 of the 21 major manufacturing industries, representing 68% of total shipments, posted increases.

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On a provincial basis, shipments increased in seven provinces and all territories in October. Ontario led the provinces, with shipments up $97.1 million (+0.4%) from September. Also up strongly, British Columbia’s manufacturers advanced shipments by $63.5 million (+2.2%), and New Brunswick reported a $51.7 million (+4.8%) increase for the month.

Canada’s manufacturing sector fares well for the year so far

The first 10 months of 2002 have been favourable for many Canadian manufacturers. The sector has resisted much of the recent economic and geo-political tensions gripping the global marketplace.

Year-to-date shipments at the end of October were up 1.3% from the same period of 2001. Persistently low interest rates, a healthy job market and increasing disposable income sustained many sectors of the domestic economy and the prospects of Canadian manufacturers.

In the United States, manufacturers continued to face an uphill battle since the downturn of the economy in 2001. From January to October 2002, U.S. shipments remained 1.7% below the same period of 2001. On a more positive note, manufacturers in the United States reported a 1.0% increase in shipments for October, following declines in August (-0.7%) and September (-0.3%). Higher output in the motor vehicle and parts industry and in the petroleum and coal products industry improved shipment levels in October.

Manufacturers continue to hire

Manufacturers continued to create jobs. Following decreases in September (-17,000) and October (-15,000), employment in manufacturing rebounded with the addition of 33,000 new jobs in November. Significant increases were reported by the food, computer and machinery industries. According to the most recent release of the Labour Force Survey, 150,000 (+6.8%) new manufacturing jobs were created from January to November.

The manufacturing sector also increased its rate of capacity use for a third straight quarter. According to the latest release of Industrial capacity utilization rates, manufacturers operated at 84.6% of their capacity in the third quarter, compared with 83.5% in the second. The rise in the rate was widespread, with several of the largest increases in capacity use reported by export-oriented industries.

Inventories rose in October for the third time in four months, expanding 0.5% to $62.6 billion. Unfilled orders fell back 0.5%, the second monthly decrease in a row. Unfilled orders were at their lowest point since January.

Rising prices for petroleum and coal products pull up shipments in October

Prices for petroleum and coal products have been on an upswing through most of 2002. Ongoing market uncertainty in the Middle East contributed to a further 3.2% rise in prices for October. Higher prices were entirely responsible for a 3.1% advance in shipments of petroleum and coal products this month, the seventh increase in the last eight months. Shipments in October were $3.1 billion.

Shipments of wood products increased 3.3% to $2.5 billion. This followed a 2.5% drop in September, the first decrease since June. Despite the reinstatement of U.S. duties on Canadian exports of softwood lumber in May, exceptional domestic demand for new housing continued to support the wood products industry. Canadian housing starts remained solid in October. In addition, according to the latest release of building permits, a record high in construction intentions for single-family homes was reported in October. Nearly 19,000 new dwelling units were authorized during the month.

Beleaguered manufacturers in the computer and electronic products industry shipped fewer goods in October, offsetting much of the rise in total shipments. Shipments of computer and electronic equipment plunged 8.9% to $1.7 billion in October, largely wiping out the 10.3% increase in the previous month. September’s strong gain coincided with a number of quarter-end boosts in manufacturing of computers and electronic parts at several plants. Year-to-date shipments stood at $17.9 billion, down 17.7% from the same period of 2001. Weak demand continued to plague the telecommunications sector.

Manufacturers post higher inventories in October

Following a 0.1% decline in September, manufacturers reported higher inventories in October. Inventories grew 0.5% to $62.6 billion, the highest level since December 2001. This was the third increase in the last four months, and followed an extended period of intense inventory reductions.

October’s increase was concentrated in goods-in-process inventories, which rose 1.0% to $16.0 billion. Raw materials (+0.4%) and finished-product (+0.3%) inventories were also up. Finished-product inventories increased for a third consecutive time to $19.3 billion, a six-month high. According to October’s Quarterly Business Conditions Survey, the majority of manufacturers indicated that they were relatively content with their levels of finished-product inventories going into the fourth quarter of 2002.

Manufacturers in the machinery and the chemical products industries were the primary contributors to the higher inventories in October.

Continued stability for the inventory-to-shipments ratio

The inventory-to-shipments ratio edged up to 1.42 in October, up from 1.41 in September. A solid increase in inventories relative to a modest rise in shipments contributed to the higher ratio. The ratio has been relatively steady since April, and remained well below the nine-year high of 1.56 established in October 2001.

The trend for the inventory-to-shipments ratio has been unchanged since August. Previously, the trend had been gradually shifting down since the fall of 2001.

The finished-product inventory-to-shipments ratio shifted up slightly to 0.44 in October. The ratio is an important measure of the time that would be required in order to exhaust finished-product inventories if shipments were to remain at their current level.

Manufacturers face fewer unfilled orders for a second straight month

Unfilled orders decreased 0.5% in October, following a 1.1% drop in September. Orders decreased to $46.3 billion, the lowest level since January. Fewer orders for machinery, aerospace products and parts and heavy trucks offset a rise in unfilled orders for computers and electronic products, this industry’s first increase since July.

New orders posted a 0.8% increase to $44.0 billion in October, partly recovering September’s losses (-2.2%). Manufacturers reported higher orders for computers and electronic products, which offset a sharp decline in the machinery industry.

To view the charts that accompany this report, visit http://www.statcan.ca.