MRO Magazine

Manufacturer’s outlook continues to brighten despite impediments

Ottawa, ON -- The outlook of manufacturers in the month of July for the third quarter of 2004 was more upbeat than...


Industry

July 30, 2004
By MRO Magazine
MRO Magazine

Ottawa, ON — The outlook of manufacturers in the month of July for the third quarter of 2004 was more upbeat than when last surveyed in April, according to Statistics Canada’s latest Business Conditions Survey of manufacturing industries released July 30, 2004.

Both production and employment prospects for the coming quarter were higher and satisfaction with the current levels of unfilled orders and orders received was positive.

Despite the apparent optimism, some uncertainty remains on the horizon. As in the previous survey, producers in the primary metals, fabricated metal products and machinery industries expressed major concerns about steel shortages, higher prices and increasing exports of scrap metal to China.

In July, 23% of manufacturers stated they would increase production in the third quarter of 2004, while 13% expected to decrease production, leaving the balance of opinion at +10. This was an increase from the +7 posted in April. Led by producers in the transportation equipment and primary metals industries, 16 of the 21 manufacturing industries continued to contribute to the positive balance.

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The July balance of opinion on the current level of orders received increased 8 points to reach +6. The number of manufacturers who stated that orders received were decreasing fell to 13% in July from 22% in April. The balance dipped to -2 in April after being positive in the two previous surveys. Producers in the transportation equipment and primary metals industries were the major contributors to the improved balance.

In July, 79% of manufacturers reported that the current level of finished product inventories was about right, a seven percentage point increase from April. Some 14% stated that inventories were too high and 6% said inventories were too low, leaving the balance of opinion unchanged at -8. According to May’s Monthly Survey of Manufacturing, finished products shifted up by 1.3% to $20.5 billion, the highest level since last summer.

With 21% of manufacturers stating a higher-than-normal backlog and 18% expressing a lower-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at +3 in July, three points higher than in April. This represents the most positive balance since the April 2000 survey. Producers in the computer and electronic products, primary metals and machinery industries were the major contributors to the improved balance.

According to May’s Monthly Survey of Manufacturing, manufacturers reported the first decrease in unfilled orders since December. Orders edged back 0.2% to $37.1 billion, largely because of the aerospace products and parts industry (-2.6%). Excluding the aerospace industry, unfilled orders were up 0.9%.

The balance of opinion for employment prospects for the next three months was up 6 points to +5 in July. While 88% of manufacturers stated that they would keep or add to their work force, 12% indicated that they expected to decrease employment in the third quarter. This represents the most positive employment outlook since the October 2000 survey. According to the Labour Force Survey, employment in manufacturing edged down 12,000 in June. This offsets the gain in May and continues a period of little change that began during the fall of 2003. Employment in manufacturing has not yet recovered from the losses incurred between November 2002 and September 2003.

The number of manufacturers reporting no production impediments slipped a further three points to 78% in July. The number of producers reporting raw material shortages continued to increase from 7% in April to 8% in July. The concern over raw material shortages was mostly felt in the primary metals, fabricated metal products and machinery industries. The manufacturers in these industries have expressed concerns about steel shortages, higher prices and increasing exports of scrap metal to China (a country that has recently been experiencing a construction boom). Although not as strong, there was increasing concern over raw material shortages in the paper and food industries. The proportion reporting a shortage of skilled labour was up two points to 7%.