MRO Magazine

Canada’s booming manufacturing industry sets record in August

Ottawa, ON -- In August, 2004, manufacturers racked up their ninth successive increase in shipments, according to t...


Industry

October 19, 2004
By MRO Magazine

Ottawa, ON — In August, 2004, manufacturers racked up their ninth successive increase in shipments, according to the latest Monthly Survey of Manufacturing from Statistics Canada.

Robust production in the durable goods sector coupled with high industrial prices contributed to a record level of shipments of $50.8 billion, up 0.8% since July. This also marks the longest string of increases in manufacturing shipments since 10 consecutive advances were reported from April 1987 to January 1988.

Strong demand, both domestic and from abroad, continued to fuel Canada’s manufacturing sector. This demand has also been a source for the exceptional gains in industrial prices of several resource-based industries in 2004, contributing to the record high shipment values.

During the first eight months of 2004, shipments were up an impressive 8.0% compared with the same period in 2003, although this activity has not translated into job gains. According to the Labour Force Survey for September, employment in manufacturing has changed little since the fall of 2003.

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Shipments measured in constant dollars rose 1.5% in August, attesting to solid production levels for the month.

Manufacturers have faced a host of obstacles in 2004, including the strong value of the Canadian dollar, soaring input prices and political unrest in various regions of the world that contributed to record high oil prices.

Despite the impediments, the summer of 2004 has been upbeat for many of Canada’s big-ticket, durable goods industries. Shipments of durable goods led the way in August, rising another 1.7% to $29.1 billion, the seventh increase in a row. Durable goods shipments are now just shy of the record level set in October 2000 ($29.6 billion) at the height of the high-tech boom.

Non-durable goods manufacturing fell back 0.4% to $21.7 billion in August, the first decline in 10 months. Overall, 12 of 21 industries, accounting for 65% of total shipments, posted increases in August.

BIG GAINS IN ONTARIO AND THE PRAIRIE PROVINCES

Ontario led the pack as seven provinces and the territories reported higher shipments in August. Driven by increases in the motor vehicle and parts industries, as well as chemical and fabricated metal products manufacturing, Ontario’s shipments rose by $435 million (+1.7%) to $26.8 billion.

Manufacturers in Saskatchewan chalked up their fourth consecutive increase and shipments improved by $72 million (+8.6%) to $907 million. Resource-based industries, benefiting from high prices, have provided some big gains to the province’s manufacturing sector in 2004. In Manitoba, manufacturers reported record high shipments of $1.1 billion in August, up $68 million (+6.6%) from July. Several industries including transportation equipment and miscellaneous manufacturing contributed to the increase.

Partly offsetting August’s boost was a $207 million (-1.8%) decrease in Quebec manufacturing. Shipments fell to $11.6 billion, only the second decline in the last nine months. Despite the recent decline, year-to-date shipments in Quebec are up 7.2% compared with the same period in 2003.

DURABLE GOODS INDUSTRIES REPORT SOLID GAINS

In August, motor vehicle parts manufacturing led all industries. Shipments jumped 4.8% to $2.8 billion, as several plants boosted production following some extended summer shutdowns in July. In addition, parts manufacturers geared up production as the 2005 models of motor vehicles came on line. During the first eight months of 2004, shipments of motor vehicle parts were up 7.2% compared with the same period in 2003.

Shipments of primary metals hit $3.9 billion, an increase of 2.8% from July. The surge in prices for primary metals, as a result of strong foreign demand in 2004, contributed to yet another record high for shipments. Manufacturers of fabricated metal products boosted shipments by 3.5% to $3.0 billion in August. The industry reported widespread gains as some manufacturers increased production following temporary plant closures for maintenance in July.

Rounding out the top four industries in August, strong demand and high prices contributed to a 2.2% increase in manufacturing of chemical products.

MANUFACTURERS CONTINUE TO STOCK UP

Inventories received a big boost in August, rising 1.4% to $61.8 billion, the highest level since December 2002. Manufacturers have been stocking up throughout 2004, on account of strong demand for Canadian-made products. Inventories, which have been trending up since the start of the year, are 6.0% higher in August compared with December 2003.

All three stages of fabrication posted higher inventory levels. Manufacturers expressed ongoing confidence in the economy, boosting raw material inventories by 0.9% to $27 billion, the sixth increase in a row. Meanwhile, goods-in-process (+3.6%) and finished-products (+0.7%) inventories were also on the rise.

The fabricated metal products (+4.3%), aerospace products (+3.5%) and primary metals (+2.9%) industries were the main contributors to higher inventories in August.

SLIGHT RISE IN THE INVENTORY-TO-SHIPMENT RATIO

Inventories rose at a faster pace than shipments in August, contributing to the slight rise in the inventory-to-shipment ratio. The ratio was 1.22 in August, up from 1.21 in Julyits lowest level of the ratio since the start of the current series in 1992.

Meanwhile, the finished-products inventory-to-shipment ratio held constant at 0.41 for the third month in a row, maintaining the lowest level for the ratio since mid-2000. 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.

AFTER A STEADY RISE, NEW ORDERS WEAKEN

New orders fell back 1.0% to $50.4 billion in August, only the second decrease in the last nine months. Despite the drop, the level of new orders remains 14.0% above the recent low of $44.2 billion in November 2003. The trend, although showing signs of slowing, has been positive since August 2003.

Fewer new orders received by the aerospace (-35.7%) and motor vehicles (-1.4%) industries were largely responsible for the decrease.

The backlog of unfilled orders weakened in August, pulled down by the aerospace products and parts industry. Unfilled orders declined 1.1% to $37.4 billion, wiping out much of July’s 1.3% gain. Excluding the aerospace industry, unfilled orders were unchanged.

Aside from the aerospace industry (-3.7%), unfilled orders also decreased in the motor vehicle (-7.4%) and parts (-5.9%) industries. Despite the decreases, several new contract signings have bolstered the order books of these industries in recent months. In August, total unfilled orders were 6.9% above levels of December 2003.