Manufacturing shipments top $50 billion in April
Ottawa, ON -- Manufacturers continued to hold their own in April 2005 as they reported another healthy gain in unfi...
Ottawa, ON — Manufacturers continued to hold their own in April 2005 as they reported another healthy gain in unfilled orders, the third in four months. At the all-industry level, manufacturing shipments have essentially plateaued since October 2004, despite monthly volatility in some industries, according to the latest Monthly Survey of Manufacturing from Statistics Canada.
Big ticket, durable goods industries contributed to a 1.1% boost in unfilled orders to $39.5 billion, following a 1.8% gain in March. Meanwhile, manufacturing shipments rose 0.9% to $50.2 billion in April, partly recovering the losses incurred in February (-0.9%) and March (-2.2%).
Manufacturers have remained resilient despite some less-than ideal economic influences. Ongoing geopolitical unrest and concerns over U.S. domestic petroleum supplies once again sent the price of crude oil to record levels in early April. Rising input costs, increased global competition and an appreciated value of the Canadian dollar were some of the challenges manufacturers continued to face.
According to StatCan’s latest Business Conditions Survey, manufacturers reported that they would maintain the same level of production in the coming three months. The most recent manufacturing survey seems to confirm their expectations. On the other hand, manufacturers did express concern with the low level of unfilled orders going into the second quarter of 2005. Strong domestic and foreign demand, which has fuelled several manufacturing industries, may have an impact on some of these concerns.
STRONG GAINS IN UNFILLED ORDERS
Unfilled orders, which may contribute to future shipments if they are not cancelled, have been on an upward trend since November and by April, reached the highest level since March 2003. Currently, unfilled orders are up a substantial 7.4% compared to one year ago.
The aerospace products and parts industry (+2.4%), primary metals (+5.9%) and fabricated metals (+1.8%) were the main contributors to the rise in orders in April. Following a string of recent order announcements, the aerospace industry continued to show strength. Unfilled orders rose for the fourth time in the last five months, improving to $12.6 billion in April. Excluding the aerospace industry, unfilled orders remained up 0.6%.
MANUFACTURERS BOOST SHIPMENTS
Following substantial declines in February (-0.9%) and March (-2.2%), manufacturers posted a 0.9% increase in shipments to $50.2 billion in April. At 1997 prices, shipments edged up 0.1% to $46.9 billion in April, following a 2.2% drop in March.
The volatile transportation equipment sector (+5.2%) boosted shipments of durable goods 1.9% to $28.5 billion. In recent months, weakness in the motor vehicle and parts industries, plus the irregular production of aerospace products, contributed to a general decline in durable goods manufacturing. Meanwhile, shipments of non-durable goods slipped back 0.3% in April.
Despite some significant month-to-month variability of ‘high-profile’ industries, including motor vehicles and aerospace, other manufacturing sectors have picked up the pace to fill the void. Improved demand and high industrial prices have boosted shipment levels of various industries in 2005, which offset the weakness in some of the more volatile industries. As a result, the trend for total shipments has been relatively constant since October 2004.
SHIPMENTS UP COMPARED TO LAST YEAR
Year-to-date shipments were up 4.8% compared to the first four months of 2004. Some of the big movers in 2005 included the price-driven petroleum industry (+25.5%), fabricated metal products (+12.8%) and machinery (+13.7%).
Manufacturers operated at a record 87.0% of capacity in the first quarter of 2005, according to the most recent report on industrial capacity utilization rates. Rates increased significantly among various durable goods industries including computers, machinery and fabricated metal products.
By province, Ontario (+$369.4 million), Quebec (+$180.5 million) and Alberta (+$128.2 million) led the six provinces reporting higher shipments in April. These provinces offset resource-based declines in New Brunswick (-$154.9 million) and British Columbia (-$50.3 million).
INVENTORIES REMAIN STABLE
Manufacturers’ inventories, which had been on a steady rise since January 2004, were unchanged at $64.5 billion in April, the highest level since November 2001.
Some plants preparing for temporary shutdowns contributed to the decrease in inventories, including motor vehicles (-11.3%) and petroleum and coal products (-4.6%). They were offset by higher inventories of primary metals (+1.1%) and food (+1.3%).
Finished product inventories rose 0.5% to $22.3 billion in April, marking the eighth increase in the last nine months. Manufacturers’ finished products have risen 10% over the last year.
Goods in process inventories fell back 1.0% to $14.3 billion, counterbalancing the rise in finished products. Inventories of raw materials were constant at $28.0 billion in April.
Following a recent high in March (1.30), April’s boost in shipments pulled down the inventory-to-shipment ratio to 1.28 for the month. The ratio has been on a gradual upward trend since late last summer, as manufacturing began to show signs of vulnerability.
The inventory-to-shipment 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.
NEW ORDERS ON THE RISE
New orders were up 0.4% to $50.7 billion in April, following decreases in February (-4.9%) and March (-0.5%). New contracts received in the transportation equipment sector were largely responsible for the increase. Excluding the transportation sector, new orders slipped 0.3%.
Motor vehicle parts (+9.5%), aerospace products and parts (+18.4%) and primary metals (+4.0%) manufacturing were the main contributor in April.
Following March’s strong showing, when new orders for the computer and electronic products industry surpassed the $2 billion mark for the first time since mid-2003, manufacturers’ order books dropped 10.1% in April.