MRO Magazine

Manufacturers anticipate even more improvements in coming quarter

Ottawa, ON -- Building on the momentum of the past nine months, manufacturers' outlook for the fourth quarter of 20...


Industry

November 12, 2004
By MRO Magazine

Ottawa, ON — Building on the momentum of the past nine months, manufacturers’ outlook for the fourth quarter of 2004 remained optimistic, according to Statistics Canada’s October 2004 Business Conditions Survey: Manufacturing Industries.

Manufacturers anticipated further improvements for production and employment in the coming quarter, while they were very satisfied with the current level of orders received.

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

MANUFACTURERS CONTINUE TO BE MORE POSITIVE ABOUT PRODUCTION PROSPECTS

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In October, 22% of manufacturers stated they would increase production in the fourth quarter of 2004, while 9% expected to decrease production, leaving the balance of opinion at +13. This was an increase from the +10 posted in July. Led by producers in the computer and electronic product and the machinery industries, 16 of the 21 manufacturing industries continued to contribute to the positive balance.

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 be increasing.

STRONGER SATISFACTION WITH LEVEL OF ORDERS RECEIVED

The October 2004 balance of opinion on the current level of orders received increased a further 7 points to +14. This is the strongest balance posted since a +21 in April 2000. The balance had dipped to a low of -36 in October 2001. The number of manufacturers who stated that orders received were decreasing declined to 4% in October from 12% in July. Producers in the computer and electronic product, the electrical equipment, appliance and component and the chemical industries were the major contributors to the improved balance.

MANUFACTURERS’ SLIGHTLY MORE CONCERNED WITH FINISHED PRODUCT INVENTORIES

In October, 79% of manufacturers continued to report that the current level of finished product inventories was about right, unchanged from July. Some 17% stated that inventories were too high, while only 4% said inventories were too low. This left the balance of opinion at -13, a 5-point drop from the July survey. Results from the Monthly Survey of Manufacturing for August 2004 showed that finished products continued to increase to a level of over $20.7 billion, the highest level since June 2003.

MANUFACTURERS’ SATISFACTION WITH UNFILLED ORDERS DOWN SLIGHTLY

With 20% of manufacturers stating a higher-than-normal backlog and 19% expressing a lower-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at +1 in October, only 1 point lower than in July. This represents the second positive balance this year, after being mostly negative since mid-2000 and dipping as low as -42 in October 2001. Producers in the computer and electronic product and primary metal industries were the major contributors to the positive balance. Results from the Monthly Survey of Manufacturing for August 2004 showed that unfilled orders declined 1.1% to $37.4 billion.

MANUFACTURERS’ EMPLOYMENT PROSPECTS ARE VERY POSITIVE

The balance of opinion for employment prospects for the next three months was up 3 points to +9 in October. While 91% of manufacturers stated that they would keep or add to their work force, only 9% indicated that they expected to decrease employment in the fourth quarter. This represents the most positive employment outlook since the April 1998 survey. According to the Labour Force Survey, employment in manufacturing at the national level has changed little since the fall of 2003. On the other hand, the average number of hours worked in the third quarter of 2004 was higher than the same quarter one year earlier.

FEWER MANUFACTURERS REPORTED PRODUCTION IMPEDIMENTS

The number of manufacturers reporting no production impediments was up 3 points to 81% in October. The number of producers reporting raw material shortages dropped from 8% in April to 5% in October. The decreasing concern over raw material shortages was mostly felt in the primary metals industries. Meanwhile, manufacturers in the fabricated metal product and machinery industries continued to express concerns about steel shortages and higher prices. The proportion reporting a shortage of skilled labour was down 1 point to 6% and those reporting a shortage of unskilled labour increased 1 point to 3%.