MRO Magazine

Manufacturing outlook for first quarter of 2004 “cautiously optimistic”

Ottawa, ON -- Canadian manufacturers were cautiously optimistic regarding the outlook for the first quarter of 2004...


Industry

February 26, 2004
By MRO Magazine
MRO Magazine

Ottawa, ON — Canadian manufacturers were cautiously optimistic regarding the outlook for the first quarter of 2004, after being dealt a series of economic blows in 2003, as a result of SARS, BSE (mad cow disease) and a major power blackout.

With these events fading into the past, Statistics Canada reports business confidence improved and greater satisfaction was expressed for production, finished products inventory levels and orders received. However, manufacturers still expressed some concern with low levels of unfilled orders in its January 2004 Business Conditions Survey of manufacturing industries.

The voluntary survey, conducted in the first two weeks of January, to which almost 4,000 manufacturers responded, requested opinions on production impediments, finished product inventory levels, new and unfilled order levels, production and employment prospects in the coming three months.

In January, 30% of manufacturers stated they would increase production in the first quarter, while 15% expected to decrease production, leaving the balance of opinion at +15. This was a slight decrease from the +18 posted in October.

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Led by producers in the primary metal and transportation equipment industries, 16 of the 21 manufacturing industries contributed to the positive balance. Manufacturers in all provinces were 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 increase.

The January balance of opinion on the current level of orders received increased 11 points to +14. The proportion of manufacturers who stated that orders received were increasing was 24% in January, compared with 20% in October.

This was the highest positive balance posted for orders received since April 2000, when it was +21. Again, producers in the transportation equipment and primary metal industries were the major contributors to the improved balance.

According to the Monthly Survey of Manufacturing, new orders have increased in four of the last six months, and the trend continued to gradually improve. New orders in November, at $41.9 billion, were up 1.0% from October.

In January, 85% of manufacturers reported that the current level of finished product inventories was about right, 8% said inventories were too high and 7% said they were too low, leaving the balance of opinion at -1, a 13-point improvement from October.

According to November’s Monthly Survey of Manufacturing, finished product inventories stood at $18.9 billion, their lowest level since July 2002 and the seventh decrease in a row.

With 10% of manufacturers stating a higher-than-normal backlog and 23% expressing a lower-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at -13 in January, 1-point lower than October. Producers in the transportation equipment, machinery and fabricated metal product industries were the major contributors to the negative balance.

According to the Monthly Survey of Manufacturing, manufacturers posted a 0.8% drop in unfilled orders in November to $37.2 billion, their lowest level in over six years.

Manufacturers less positive about employment prospects

The balance of opinion for employment prospects for the next three months slipped 3 points to -2 in January. While 83% of manufacturers stated that they would keep or add to their workforce, 17% indicated that they expected to decrease employment in the coming quarter.

According to the year-end report of the Labour Force Survey, manufacturers hired fewer employees in 2003. Since November 2002, the number of manufacturing jobs declined by 82,000. On a monthly basis, manufacturing employment edged down 0.2% (-4,100 jobs) in December, following November’s 1.0% boost. At year’s end, there were just under 2.3 million people employed in Canadian factories.

The number of manufacturers reporting no production impediments jumped 9 points to 84% in October. The proportion reporting a shortage of skilled labour decreased 3 points to 5%. A shortage of unskilled labour was reported by 2% of manufacturers.

Other impediments reported by 4% of manufacturers included the continuing appreciation of the Canadian dollar, a shortage of orders and the impact of the softwood lumber dispute.