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Manufacturers upbeat about the fourth quarter of the year

Ottawa, ON -- Following a summer with a major blackout, a case of bovine spongiform encephalopathy (BSE or mad cow...


Ottawa, ON — Following a summer with a major blackout, a case of bovine spongiform encephalopathy (BSE or mad cow disease) and an increasingly strong dollar, manufacturers were upbeat about fourth quarter production and employment prospects in Statistics Canada’s October 2003 survey of business conditions in the manufacturing industries across the country. However, manufacturers were still expressing some concern with high levels of finished product inventories and low levels of unfilled orders.

The voluntary survey, to which almost 4,000 manufacturers responded, requests opinions on production impediments, finished product inventory levels, new and unfilled order levels, production and employment prospects in the coming three months.

In October, 34% of manufacturers stated they would increase production in the fourth quarter, while 16% expected to decrease production, leaving the balance of opinion at +18. This represents a 17-point rise from July and is the highest positive balance since April 2000. Producers in the primary metal, transportation equipment and food industries were the major contributors to the increase.

By province, manufacturers in Saskatchewan, Alberta and Ontario were the most positive about production prospects for the coming three months.

The balance of opinion is determined by subtracting the proportion of manufacturers that stated production would decrease in the coming three months from the proportion who stated production would be increasing.

With 14% of manufacturers stating a higher-than-normal backlog and 25% expressing a lower-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at -11 in October. Producers in the primary metal, transportation equipment, fabricated metal product and wood product industries contributed to the 18 point improvement in the balance.

According to the Monthly Survey of Manufacturing, unfilled orders in August stood at slightly over $38.4 billion, down 19.2% from August 2002 and the lowest level since October 1997.

Following two negative results, the October balance of opinion on the current level of orders received increased 9 points to +2. The number of manufacturers who stated that orders were increasing went to 20% in October from 15% in April. Again, producers in the transportation equipment, primary metal and fabricated metal product industries were the major contributors to the improved balance.

In October, 73% of manufacturers reported that the current level of finished product inventories was about right, 21% stated that inventories were too high and 5% said inventories were too low, leaving the balance of opinion at -16, a 4-point improvement from July. According to August’s Monthly Survey of Manufacturing, finished product inventories posted a 2.4% decrease to $19.1 billion, their lowest level in one year and the fourth decrease in a row.

Employment prospects

The balance of opinion for employment prospects for the next three months jumped 9 points to +2 in October. While 86% of manufacturers stated that they would keep or add to their workforce, only 14% indicated that they expected to decrease employment in the coming quarter. After remaining negative during the last eleven quarters, this was the first positive employment prospects balance of opinion.

According to the latest release of the Labour Force Survey, manufacturing employment edged down a further 15,000 in September, bringing factory job losses so far in 2003 to 77,000 (-3.3%).

The number of manufacturers reporting no production impediments fell 4 points to 75% in October. The proportion reporting a shortage of skilled labour increased 1 point to 8%. A shortage of unskilled labour was reported by 3% of manufacturers. Other impediments reported by 6% of manufacturers included the continuing appreciation of the Canadian dollar, a shortage of orders and the impact of mad cow disease.