MRO Magazine

April survey sees manufacturers expecting more of the same

Ottawa, ON -- In spite of concerns about rising finished product inventories and lower order levels, Canadian manuf...


Industry

May 25, 2005
By MRO Magazine
MRO Magazine

Ottawa, ON — In spite of concerns about rising finished product inventories and lower order levels, Canadian manufacturers were anticipating to maintain the same level of production in the coming three months, reports Statistics Canada in its April 2005 Business Conditions Survey of Manufacturing Industries.

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

In April, the number of manufacturers stating they would increase production over the next three months stood at 18%, a 5-point increase from the January survey. At the same time, manufacturers indicating they would decrease production in the second quarter rose 4 points to 17%. As a result, the balance of opinion stood at +1, a 1 point improvement from the January balance. The current balance is 9 points lower than in the April 2004 survey.

Producers in the computer and electronic products, machinery and primary metal industries were the largest contributors to the positive balance. Overall, 12 of the 21 manufacturing industries contributed to the positive movement.

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The balance of opinion is determined by subtracting the proportion of manufacturers who stated production would decrease in the coming three months from the proportion who stated production would be increasing.

After remaining positive throughout 2004, the April balance of opinion on the current level of orders received decreased 4 points to -5. The number of manufacturers who stated that orders received were declining was 23% in April, 7 points higher than in January. Producers in the transportation equipment, wood products and paper industries were among the major contributors to the decrease in the orders received balance of opinion.

With 34% of manufacturers expressing a lower-than-normal backlog and 12% stating a higher-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at -22. This was a 7 point drop from what was reported in the January 2005 survey.

The balance of opinion has posted a cumulative drop of 21 points in the last two surveys. This brings us close to the level posted in the July 2003 survey (-24). Producers in the transportation equipment industry were the major contributors to the further decrease in the unfilled orders balance of opinion. According to February’s Monthly Survey of Manufacturing, unfilled orders declined 0.5% to $38.1 billion — the second highest level in almost two years.

In April, 65% of manufacturers reported that the current level of finished product inventories was about right, a 9 point drop from the January level. Some 29% stated that inventories were too high, while 6% said inventories were too low. This left the balance of opinion at -23, a 9 point slide from the January survey. This was the third consecutive drop in the finished product inventories balance of opinion since July 2004 (-8). According to February’s Monthly Survey of Manufacturing, finished products stood at almost $22.2 billion, 9.5% above levels of one year ago.

MANUFACTURERS’ EMPLOYMENT PROSPECTS SLIGHTLY POSITIVE

The balance of opinion for employment prospects for the next three months increased 5 points to +3 in April. While 84% of manufacturers stated that they would keep or add to their work force, 16% indicated that they expected to decrease employment in the second quarter.

According to the March Labour Force Survey, employment in the manufacturing sector stood at almost 2.27 million, virtually unchanged from the February level. The first quarter average number of employees was 0.5% lower than the average for the last three months of 2004.

MANUFACTURERS REPORTED MORE PRODUCTION IMPEDIMENTS

The number of manufacturers reporting no production impediments dropped 15 points to 71% in April. After reaching a high of 8% in the April and July 2004 surveys, the number of producers reporting raw material shortages increased from 4% in January to 5% in April.

The proportion reporting a shortage of skilled labour was up 2 points from January to 7%. While those reporting a shortage of unskilled labour increased 1 point to 2%.

Producers reporting ‘other production impediments’ jumped 10 points to 12% in April. This large increase was mostly concentrated in the transportation equipment industry where manufacturers commented on overstock of finished product inventories and lower order levels. Other comments in this category related to impediments caused by the high value of the Canadian dollar and cheap foreign imports.