New manufacturing orders jumped by more than a billion dollars in November
Ottawa, ON -- Factory shipments bounced back in November 2006, mainly because of a strong showing in the transporta...
Ottawa, ON — Factory shipments bounced back in November 2006, mainly because of a strong showing in the transportation equipment sector, which rebounded after hitting its lowest level in nearly two years in the third quarter.
According to Statistics Canada’s latest Survey of Manufacturing, Canadian manufacturers shipped goods worth an estimated $49.0 billion in the month, up 2.3% from October.
Taking price fluctuations into account, the volume of shipments increased 2.0% to $44.7 billion, the largest single monthly constant dollar increase in 15 months, after trending downward for most of the year. Widespread price declines had little effect on the value of shipments, especially in the petroleum and coal industry, where the monthly drop in prices for petroleum and coal was the smallest in two years.
On a year-to-date basis, the volume of shipments fell 1.6% between January and November 2006, compared with the same period in 2005.
November’s increase was widespread as 13 sectors, representing 73% of total output, increased.
Durable goods shipments increased for a second consecutive month following three months of decline, rising 3.1% to $26.8 billion, thanks to a strong showing in the transportation equipment sector.
In spite of softening commodity prices, higher volumes helped non-durable goods shipments increase by 1.3% to $22.2 billion in November. Lower commodity prices, were the main factor behind the declines observed in the previous three months.
Coincident with November’s increase in shipments, the Labour Force Survey indicated that manufacturing employment also rebounded in November, rising an estimated 13,200 to over 2.1 million. Despite November’s increase, year-to-date job losses in the industry totaled 72,000.
TRANSPORTATION EQUIPMENT SHIPMENTS HIGHEST IN EIGHT MONTHS
Following the introduction of new model launches, motor vehicle shipments increased 13.7% to $5.2 billion, helping the transportation equipment sector bounce back from four consecutive losses. The sector shipped $9.7 billion worth of product in November, the highest level in eight months.
Aerospace shipments rose 9.5% to $1.3 billion following a similar sized decline in October. For the first 11 months of 2006, aerospace shipments were 1.8% lower than in the same period of 2005.
Shipments from Canadian refineries increased by 4.6% to $4.7 billion. Unlike the previous four months, price changes had little effect on the value of shipments with November’s moderate price decline being the smallest in two years.
Food manufacturing, the second largest after transportation equipment, made up some lost ground in November with a 1.2% increase to $5.7 billion — the third highest level in two years.
ONTARIO AND QUEBEC DRIVE SHIPMENTS INCREASE
Shipments in Ontario and Quebec benefited from resurgence in the transportation equipments sector in November.
Ontario shipments increased 3.7% to just under $24 billion. Overall, 12 of the 21 industries registered increases but it was the transportation equipment sector that led Ontario’s jump in shipments, contributing 84% of the $859 million increase. After four consecutive months of decline, when plant model change-overs were delayed, motor vehicles bounced back to the highest level since February of 2006. Excluding transportation, shipments would have risen 0.5%.
In Quebec, shipments increased 2.0% to $12.0 billion as petroleum and coal shipments rose by 8.4% to $1.2 billion. The province’s largest manufacturing industry, primary metals, continued to post strong gains, bolstered by near record commodity prices. Shipments from the aerospace and chemical industries also contributed to the November increase.
Shipments from Alberta fell by 0.7% to $5.2 billion in November. While the price of petroleum and coal products fell slightly, shipments increased by 1.8% to $1.0 billion. At the peak of prices for petroleum and coal in August 2006, the value of shipments of petroleum and coal were neck and neck with chemicals. Since then, with commodity prices falling, chemical shipments, have declined, but at a slower pace, to $1.2 billion, now nearly 20% higher than shipments from petroleum and coal.
Shipments from British Columbia declined 1.5% to $3.5 billion. Declines in the shipments of paper accounted for roughly half of this total, falling 5.8% to $459 million. Overall, 12 of 21 industries in British Columbia declined while primary metals provided the largest off-setting increase, rising 5.9% to just under one-third of a billion dollars.
INVENTORIES INCREASE FOR FIFTH MONTH IN A ROW
Total inventories for manufacturers increased 0.3% to $63.6 billion in November, the fifth increase in a row and an increase of $1.5 billion since the start of the year.
Transportation equipment inventories increased 0.5% to $8.9 billion — the highest level since March 2006. Most of the increase was observed in the aerospace industry, which grew 2.6% to $4.2 billion.
Inventory levels in the petroleum and coal industry were also up, increasing 5.0% to $3.6 billion after falling for three months.
By stage of fabrication, goods in process inventories had climbed consistently over the past two years, but fell marginally in November. Inventories of raw materials and finished products rose marginally in November. Petroleum and coal finished product inventories rose on warmer weather in Eastern Canada and the United States, while aerospace inventories progressed from in-process to finished stages of manufacture.
INVENTORY-TO-SHIPMENT RATIO DOWN FROM RECENT HIGH
The inventory-to-shipment ratio fell to 1.30 from 1.33 in October. The ratio had risen for three consecutive months before turning back in November.
With shipments rising faster than finished goods inventories, the finished product inventory-to-shipment ratio fell back modestly to 0.46 from October’s ratio of 0.47.
The inventory-to-shipment ratio is a key measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.
NEW ORDERS FOR MOTOR VEHICLES AND AEROSPACE CLIMB
In November, new orders jumped by more than a billion dollars, increasing 3.9% to $49.9 billion. The modest increase in October saw the manufacturing sector turn a corner after trending downward for the last 13 months. November’s increase was almost entirely a result of a one and a half billion dollar surge in orders in the transportation equipment sector, divided between an $800 million increase in motor vehicle manufacturing and a $726 million jump in aerospace orders. Excluding transportation, new orders would have risen only slightly.
UNFILLED ORDERS FOR AEROSPACE AT HIGHEST LEVEL IN OVER THREE YEARS
Unfilled orders increased 2.3% to $42.2 billion. Because of the high value and time lags between the order of transportation equipment, aerospace and motor vehicles typically account for half of all unfilled orders in the manufacturing sector. Unfilled orders in the transportation equipment industry increased by three-quarters of a billion dollars in November. Strong order bookings in aerospace resulted in a one billion dollar increase in orders destined for delivery at a future date, to their highest level in over three years, while year-end orders for motor vehicles tailed-off to offset some of the gain.
Data from the December Monthly Survey of Manufacturing will be released on February 15, 2007.