MRO Magazine

Industrial output declined in October 2004

Ottawa, ON -- For a second month in a row, Statistics Canada reports that growth in the Canadian economy was at a s...


Industry

December 31, 2004
By MRO Magazine
MRO Magazine

Ottawa, ON — For a second month in a row, Statistics Canada reports that growth in the Canadian economy was at a standstill in October, largely due to reduced foreign demand for fabricated products and to labour strife.

Both the goods- and services-producing sectors were affected. The output of the manufacturing sector and of utilities decreased, whereas the service sector was hurt by labour disputes in the federal public service and in professional sports.

Industrial production (the output of Canada’s factories, mines and utilities) decreased by 0.2% in October. Manufacturers and utilities reduced their output by 0.3%. The output of the mining sector however increased 0.2% due to intense oil and gas exploration activities and to the resolution of a labour dispute. In the United States, the Index of industrial production rose 0.6% in October, with all three sectors showing strength.

MANUFACTURING SECTOR RETREATS FOR A SECOND STRAIGHT MONTH

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Manufacturers reduced their output in October (-0.3%) for a second consecutive month. Foreign demand for fabricated products was reduced in the wake of a strengthening dollar that gained 3.3% during the month vis–vis the US currency, reaching its highest level in 12 years. The weakness was widespread as only 4 of the 21 major manufacturing groups advanced in October. Manufacturing of non-durable goods dropped 0.6% while output of durable products edged down 0.1%.

The output of all types of primary metal products was down in October: iron and steel products (-2.0%), aluminum products (-1.2%), non-ferrous metal products (-2.1%) and foundries (-2.9%). The fabrication of many types of machinery decreased, including those used for metalwork (-3.3%), for agriculture, construction and mining (-0.5%) as well as general-purpose machinery (-1.8%).

The production of chemical products was down 0.9% largely because of lower output of pharmaceuticals and medicine (-2.1%) and of resin and synthetic rubber (-2.2%). Nevertheless, the output of chemical products remained 9% higher than its year-ago level. Paper manufacturing excluding newsprint dropped 4.6% while printing activity was down 1.2%. The output of refineries and other petroleum and coal product manufacturers decreased 1.7%.

Strength in the fabrication of wood products (+1.7%) and of transportation equipment (+0.4%) partly alleviated the general downturn in manufacturing. Growth was widespread across wood products manufacturing. Sawmills increased their output 1.1%, production of veneer, plywood and other structural wood products was up 2.6%, while the fabrication of other wood products, such as millwork and wood containers, increased 2.4%.

Motor vehicle production was up 1.3%, helped by a surge in the output of heavy-duty trucks. The output of furniture and related products was up 1.4%. Non-metallic mineral production increased 1.2%, led by increased output of ready-mix concrete (+2.5%) due to robust housing starts in some areas.

Construction activity was reduced by 0.6% in October. Residential construction retreated 0.5% on account of fewer housing starts. Large decreases in housing starts were observed in British Columbia and the Atlantic provinces. Ontario also saw a reduction in housing starts. There were increases however in Quebec and the Prairies.

Non-residential construction decreased a further 1.2% for a seventh consecutive month in October. All types of construction declined, especially institutional and industrial. Non-residential building permits were virtually unchanged in value in October, as a strong gain in building permits for industrial structures was completely offset by declines for commercial and institutional structures. This growth reflected strong investment intentions in the manufacturing sector. Engineering and repair construction activity pulled back 0.3%.

A SURGE IN OIL AND GAS EXPLORATION

Support activities for mining, oil and gas extraction, mostly oil and gas exploration, jumped 12% in October after bad September weather in the Prairies delayed the increased interest brought about by the upsurge in the price of crude oil on international markets. Extraction of oil and natural gas however decreased 1.3% because of lower than usual oil production on the East coast.

Overall, production in the mining, oil and gas sector was up 0.2% as it also benefited from the end of a strike in iron mines that started in July 2004. The output of iron mines was still 21% below the peak reached in February. Diamond (-6.8%) and potash (-3.9%) production was also down.

Retailing activity increased 0.9% in October on the strength of motor vehicle sales bolstered by dealer incentives. General merchandise and department stores increased their sales, as well as furniture, home furnishings and computer and software stores. Consumers reduced their spending in food and beverage stores, clothing and accessories stores, and in miscellaneous stores.

Wholesaling activity decreased 0.1%. The decrease was led by machinery and electronic equipment, personal and household goods, food, beverage and tobacco products, and automotive products. Increases were recorded in the wholesaling of farm products, particularly grain dealers, building materials and other products.

LABOUR DISRUPTIONS

Two labour conflicts held back the service sector in October. Strike activities by some employees of the federal government across the country reduced the output of the federal public administration by 1.3%. The lockout of the National Hockey League players caused a 2.1% drop in the output of the arts and entertainment industries.

OTHER SECTORS
The information and communication technology industries declined 0.2% in October with reductions in both goods and services production. Tourism related industries had a mixed performance, with air transportation increasing 0.4% while accommodation and food services contracted 0.2%.