MRO Magazine

Factory floors humming again across Canada

Ottawa, ON -- Factory floors were humming in March 2004 as manufacturers posted broad-based gains, reports Statisti...


May 18, 2004
By MRO Magazine

Ottawa, ON — Factory floors were humming in March 2004 as manufacturers posted broad-based gains, reports Statistics Canada in its latest Monthly Survey of Manufacturing.

Shipments soared 3.4% to $47.7 billion, inventories continued to accumulate and manufacturers’ backlog of unfilled orders climbed for the third straight month.

March’s big boost in shipments, coupled with the small rise in inventories, triggered a sharp drop in the inventory-to-shipment ratio. From February’s 1.27, the ratio fell to 1.23 in March, a nine-year low. The ratio is a key measure of the time, in months, that would be required in order to exhaust inventories if shipments were to remain at their current level.

Healthy gains were reported by all provinces and the territories in March. Ontario led the pack with shipments of $24.8 billion, up $799 million (+3.3%). Motor vehicle, fabricated metal products and primary metals manufacturing contributed to the third increase in shipments in the last four months.


Quebec and British Columbia posted increases of $210 million (+1.9%) and $145 million (+4.6%) respectively. In Quebec, shipments were $11.2 billion in March, bolstered by large orders shipped in the primary metals and wood products industries.

British Columbia reported shipments of $3.3 billion, the highest level in just over three years. The key contributors were resource-based industries including paper and wood products.

<B>Despite a solid month, manufacturers’ outlook remains uncertain</B>

Several factors have been lingering on the horizon for manufacturers, notwithstanding March’s upbeat report. The recent strength of the Canadian dollar and the higher input costs as a result of near-record high crude oil prices have been major hurdles for the bottom line of manufacturers.

In addition, many industries dependent on steel as a key input have raised concerns of a possible shortage of the product and its escalating cost. This follows months of skyrocketing demand for raw steel by China. According to the latest Quarterly Business Conditions Survey for April, uncertainty best described manufacturers’ confidence regarding the outlook for the second quarter of 2004.

Despite the foregoing, manufacturers seem to be holding their own. Global demand, particularly by the United States and Asia, has improved significantly over the past few months. Canada’s manufacturing sector has reported consecutive gains in shipments for February (+1.1%) and March (+3.4%). In the first quarter of 2004, shipments increased 1.3% compared with the January-to-March period of 2003.

<B>U.S. factories are also bustling</B>

Along with Canadian manufacturers, the U.S. also enjoyed a stellar month. U.S. shipments soared 3.8% to $361.3 billion in March, the largest percent increase in shipments since the current series started in 1992. Increases in fabricated metal products, primary metals and petroleum were among the principal contributors.

In Canada, 19 of 21 manufacturing industries, accounting for 98% of total shipments, reported increases in March.

Shipments of motor vehicles accelerated 8.2% to $5.8 billion, outpacing all other industries. Improved incentive packages, coupled with the manufacturing of new product lines and strong demand for various models, contributed to the third boost in motor vehicle production in the last four months.

Also up sharply in March were the primary metals (+5.5%), fabricated metal products (+5.5%) and wood products (+5.2%) industries. Heated global demand and higher industrial prices in the primary metals and wood sectors have so far boosted shipment values in 2004.

<B>Rising raw materials build up total inventories</B>

Inventories continued their upswing of recent months, rising 0.3% to $58.8 billion in March, a six-month high. A 0.8% boost in raw materials ($25.4 billion) was the main contributor.

In 2003, raw material inventories were cut extensively. Following the recent shipment gains of 2004, manufacturers appear to be cautiously anticipating further opportunities to boost production, and have started to accumulate raw materials. The trend for raw materials has been gradually improving since last autumn.

Meanwhile, goods-in-process inventories inched up by 0.2%, as finished products fell back 0.4% to $20.2 billion. This marked the 10th decline in finished-product inventories in the last 11 months. Despite the recent string of declines in finished products, some manufacturers (17%) still feel their finished-product inventories remain too high, according to the Quarterly Business Conditions Survey for April.

Motor vehicles (+10.5%), petroleum and coal products (+3.2%) and fabricated metal products (+1.7%) manufacturing were the principal industries reporting higher inventories in March.

<B>Manufacturers’ unfilled orders on the rise</B>

Unfilled orders increased 0.2% to $36.5 billion in March, the third monthly rise in a row, and the longest string of consecutive increases since 1999.

Fabricated metal products (+3.8%) and machinery (+2.9%) were the key movers in March, as both industries extended their recent gains of orders by another month. Heavy-duty truck manufacturers’ helped boost unfilled orders of motor vehicles by 17.8%. Pent-up demand for large trucks, particularly from the United States, and excellent financing options contributed to the recent gains.

Partly offsetting March’s rise was a 4.6% decline in unfilled orders by the aerospace products and parts industry. Orders fell back to $12.0 billion, following several new contract signings in recent months.

<B>New orders rise four months straight</B>

Improving demand at home and abroad contributed to manufacturers’ fourth consecutive rise in new orders. In March, new orders jumped 2.4% to $47.8 billion, the highest level since November 2000, just prior to the high-tech crash and the slowdown of the economy in 2001.

Solid increases were reported by the motor vehicle, computer and primary metals industries.