MRO Magazine

Canadian manufacturing shipments continue to fall

Ottawa, ON -- Manufacturing shipments tumbled in June 2007, falling 1.8% to $48.6 billion, reports Statistics Canad...


August 16, 2007
By MRO Magazine

Ottawa, ON — Manufacturing shipments tumbled in June 2007, falling 1.8% to $48.6 billion, reports Statistics Canada in its latest Monthly Survey of Manufacturing. This was the largest decrease since January and the third consecutive monthly decline.

Despite these decreases, second-quarter shipments still managed to gain 0.7% compared with the first quarter of 2007. This was due to high shipment levels at the start of the second quarter after a particularly strong March. Examining the first six months of this year, manufacturing shipments were up 0.1% compared with the first six months of 2006.

Using constant dollars, which take price fluctuations into account, the volume of manufacturing shipments decreased 1.7% in June to $44.3 billion. This was only the second decrease in constant dollar shipments in the past nine months.

In addition to the sharp decline in the transportation equipment industry, many other sectors also reported a drop in shipments in June. On a sector-by-sector basis, 13 of 21 manufacturing industries decreased, representing about 75% of total shipments.


Excluding motor vehicles and parts, shipments in June were notably less weak, losing only 0.5%.

Shipment decreases were led once again by durable goods manufacturers, whose shipments dropped 3.2%, a third consecutive monthly decrease. Transportation equipment, primary metals and machinery manufacturers were the primary contributors to the slump. Shipments of non-durable goods also fell, slipping 0.3% to $22.9 billion. Price-driven declines in petroleum and pulp and paper helped to fuel this reduction.

Unfilled factory orders, a proxy for future shipment performance, were strong once again, increasing 2.0% in June to $49.8 billion. New orders dipped slightly by 1.0% to $49.6 billion, as a result of weakness within the transportation sector.

The automotive industry was at the forefront of weaker shipments in June. Motor vehicle shipments plunged for the third consecutive month, decreasing by almost $650 million (-13.3%), the largest monthly loss since August 2003. An appreciating Canadian dollar and soft conditions in the US auto market, which is the primary destination for over 85% of domestically produced automotive products, contributed to the recent downturn in motor vehicle shipments.

Among the largest remaining shipment decreases were those by aerospace products and parts manufacturers (-4.6%) and machinery manufacturers (-2.8%).

Primary metal shipments lost ground for a second consecutive month, slipping by 0.8%. A volume-led increase was negated by a price decrease of 3.6% in June, following declines in the value of several primary metals, including nickel and copper alloys. In addition, an ongoing labour dispute at a major primary metal factory played a limiting role, hindering an otherwise strong first half of 2007 for the sector.

On the other hand, shipments were up for miscellaneous manufacturers (+8.5%), printing and related support activities (+7.0%) and wood product manufacturers (+2.0%).


The four largest provinces (British Columbia, Alberta, Ontario and Quebec) in terms of manufacturing shipments each posted decreases in June, while the Maritime Provinces, as well as Manitoba and Saskatchewan, reported moderate-to-strong increases during the month.

Ontario was particularly hard hit by the sharp drop in shipments by the automotive industry in June. The transportation equipment industry, which tumbled 9.1% during the month, accounts for about 30% of Ontario’s total manufacturing output. Excluding Ontario, manufacturing shipments for the rest of Canada decreased only 0.3%.

After starting the year off strongly, shipments in Quebec decreased for a second consecutive month. Transportation equipment shipments also led the decline in Quebec, falling 5.3% compared with May. Primary metal manufacturers in the province also reported decreased shipments (-4.9%). A strike at a major plant and a 3.6% drop in primary metal prices were leading contributors to this decline.

Shipments in the Maritime Provinces were particularly strong in June, led by a 15.6% surge in New Brunswick and a 13.2% gain in Newfoundland and Labrador. Shipment strength in both provinces came largely from non-durable goods manufacturers.

Shipments in Manitoba continued to be a good news story, reporting a 1.0% increase compared with May. Over the first six months of 2007, Manitoba was up 13.7% compared with the same period in 2006. Most of the growth in shipments for Manitoba has come from primary metal manufacturers, as well as the transportation equipment and miscellaneous manufacturing industries.


Unfilled orders continued to pile up, as manufacturers reported a ninth consecutive month of increases. Unfilled orders are considered an indicator of future shipments, assuming orders are not cancelled. Manufacturers’ backlog of orders rose 2.0% in June to $49.8 billion. The trend for unfilled orders has been steadily improving since last summer, after remaining relatively flat for a one-year period starting in the summer of 2005.

Ship and boat building manufacturers saw unfilled orders surge ahead 130.4% or $456 million, as a number of new contracts were received in June.

In addition, demand for both military and civilian aircraft and their parts continued to be a major contributor to the recent increase in total orders. Unfilled orders for aerospace products and parts jumped 2.7% to 21.8 billion, the highest level since January 2002.

Manufacturers in the miscellaneous group also saw unfilled orders continue to surge, gaining 22.2% compared with May. This was the seventh increase in unfilled orders in the past eight months. Unfilled orders in this industry have more than doubled since January 2007, largely because of strength in medical equipment and supplies manufacturing as well as in jewellery and silverware manufacturing.


After peaking at an all-time high in December 2006, new orders decreased for the fourth time in six months in June, slipping below the $50-billion mark to $49.6 billion.

New orders were down 1.0% from May with motor vehicle manufacturers leading the slowdown. This sector’s new orders diminished by 13.8% or $678 million, its third consecutive monthly decline.

Alternatively, new orders for ship and boat building experienced a massive boost in June (+583.9% or +$458 million), as several new major contracts were announced during the month. This gain helped to mitigate some of the slide seen in other industries.


Manufacturers’ total inventories increased slightly in June, gaining 0.4% to $62.8 billion. Previously, inventories had decreased 0.4% in May, remaining fairly stable over the past year.

In June, 11 of 21 industries reported an increase to their inventories, although most of the increase came on the back of two major gains during the month. Automotive vehicle manufacturers reported a sizeable 11.5% increase in inventories during the month, possibly due to early preparation for summer shutdowns. Chemical product manufacturers also reported an increase, with inventory levels rising by 2.7% or $178 million.

These increases were partially offset by a 2.5% decrease in inventories for aerospace products and parts manufacturers.


With shipments dipping and inventory levels increasing slightly, the inventory-to-shipment ratio edged up to 1.29 in June. The ratio had reached a recent low of 1.25 in March after having peaked at a three-year high of 1.33 in October 2006.

The inventory-to-shipment ratio is a measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.