Canadian manufacturers holding their own with exports
Ottawa, ON -- Although manufacturing shipments in Canada edged down 0.2% to $45.5 billion in January 2004, manufact...
Ottawa, ON — Although manufacturing shipments in Canada edged down 0.2% to $45.5 billion in January 2004, manufacturers saw some positive signals during the month, according to the latest Monthy Survey of Manufacturing released at 8:30 a.m. EST this morning by Statistics Canada. New orders rose for the second consecutive month, while inventories increased for the second time in the past nine months.
Thirteen of the 21 manufacturing industries, accounting for 43% of total shipments, reported decreases in January. Although the decline was concentrated in the big-ticket, durable goods sector (-1.2%), this was largely offset by rising industrial prices and higher non-durable goods manufacturing (+1.3%).
In January, the Canadian dollar continued its ascent against the weakened value of the U.S. greenback. Manufacturers, many of which are reliant on export markets to sell their products, seem to be holding their own in terms of manufacturing activity, despite the higher costs associated with the rising dollar.
The majority of manufacturers remained cautiously optimistic regarding the outlook for the first quarter of 2004. According to the Business Conditions Survey for January, business confidence was improving, as 30% of manufacturers anticipated that they would increase production in the first quarter.
In addition, the rate of capacity utilization in manufacturing surged by 2.1 percentage points, reaching 84.0% in the fourth quarter of 2003. This followed four consecutive quarterly declines.
On the job front, weaknesses in manufacturing have continued in recent months. According to the Labour Force Survey for February, employment was little changed (-12,000) for the third consecutive month. A detailed report on the Labour Force Survey will appear in tomorrow’s Newsbreak (Mar. 17, 2004) on mro-esource.com.
Wide range of manufacturers report lower shipments
Fabricated metal products (-5.2%), computer and electronic products (-6.4%) and miscellaneous (-12.8%) manufacturing were among the majority of industries reporting fewer shipments in January.
Manufacturers of fabricated metal products reported shipments of $2.5 billion in January, the second decrease in the past three months. Despite the recent declines, the trend for this industry has been positive since the summer of 2003.
Shipments of computer and electronic products fell to $1.5 billion in January, after a 0.2% decrease in December. The two consecutive declines follow a period of improved production in the latter half of 2003, and are in sharp contrast to the industry’s counterparts in the United States. Computer manufacturing in the United States has been on the rebound throughout 2003 and into 2004.
Manufacturers of medical equipment, jewellery and sporting goods contributed a 12.8% drop in miscellaneous manufacturing, wiping out December’s 11.0% gain. Shipments stood at $589 million for the month.
Meanwhile, higher petroleum prices and food shipments generally offset the declines of January. Petroleum prices soared 5.4% during the month. This largely contributed to a 6.5% jump in shipments of petroleum and coal products to $3.2 billion, a 10-month high. Food manufacturing contributed to a 3.6% rise in shipments to $5.6 billion.
Higher raw materials boost inventories
Manufacturers’ inventories rose 0.5% to $58.6 billion in January. This is only the second increase in inventories since their recent high of $61.8 billion in April 2003.
January’s increase was primarily concentrated in inventories of raw materials (+1.1%), a sign manufacturers may be stocking up in anticipation of future production. Inventories of goods-in-process ($13.2 billion) and finished-products ($20.1 billion) both edged up 0.1%. This marked the first increase of finished-product inventories in nine months.
A number of industries contributed to January’s rise in inventories, including primary metals (+2.8%), fabricated metal products (+3.1%) and chemical products (+1.7%).
January’s inventory-to-shipments ratio stood at 1.29, marginally up from December’s 1.28. Since the spring of 2003, the ratio had been generally moving down, which coincided with manufacturers’ recent efforts to reduce inventory levels. The ratio is a key measure of the time that would be required in order to exhaust inventories if shipments were to remain at their current level.
New orders on the rise
New orders received in January jumped 2.5% to $46.4 billion, following a healthy gain of 2.1% in December. An indication of future production, new orders are at the highest level since October 2002. The transportation equipment and computer industries were primarily responsible for the increase.
Manufacturers’ backlog of unfilled orders rose 2.6% to $35.8 billion in January, the first increase since September. Over the past couple of years, manufacturers have been beset by weaker demand in various industries. More than $10 billion has been cut from unfilled orders since January 2002 ($46.0 billion).
New contracts contributed to a 2.3% boost in unfilled orders for the transportation equipment industry. Orders were $18.3 billion, the highest since October. Computer manufacturers also rebounded in January following a weak fourth quarter of 2003, as unfilled orders jumped 8.0% to $3.4 billion.