MRO Magazine

Sales drop in 15 of 21 manufacturing industries in September

Ottawa, ON -- Manufacturing sales declined 0.9% in September 2007, continuing a weakening trend observed over the p...


November 16, 2007
By MRO Magazine


Ottawa, ON — Manufacturing sales declined 0.9% in September 2007, continuing a weakening trend observed over the past six months, according to the latest Monthly Survey of Manufacturing from Statistics Canada. Sales of manufactured goods decreased to $50.4 billion from the $50.8 billion reported in August, and reached the lowest level posted since October 2006. Additionally, third quarter sales were 1.8% lower than those in the second quarter of 2007.

Using constant dollars, which take price fluctuations into account, the volume of sales edged up 0.1% to $49.6 billion in September. On a year-over-year basis, manufacturing sales were 2.1% higher than in September 2006 on a constant-dollar basis. The U.S. exchange rate continued to play a major role in manufacturing sales as the Canadian dollar appreciated 3.1% against the greenback compared to August.

Most industries weakened in September, with the exception of the transportation equipment industry, which reported a solid increase in sales compared to August. Manufacturing sales decreased 2.7% in September, excluding motor vehicle and parts sales.

On an industry-by-industry basis, 15 of 21 manufacturing industries decreased in September, representing about two-thirds of total sales.


Sales of durable goods advanced 0.6% in September. This was the second increase in the past three months, and reflected sizeable gains in the transportation equipment industry in July and September. Non-durable goods sales continued to slump, decreasing 2.5% for a fourth consecutive monthly decline.

New orders dropped 2.5% in September after an even sharper 5.4% plunge in August. Unfilled factory orders decreased for the first time in a year, down 1.3% from August.


Only six industries reported stronger sales in September, led by an 8.1% gain in the transportation equipment sector. Automotive manufacturers posted a 16.5% increase in sales after a weaker-than-normal August. Aerospace manufacturers also saw an increase in production, with a 3.8% gain in September, following a similar-sized increase in August. Despite the gains in the transportation equipment industry in September, year-to-date sales were only 0.8% higher than in the first nine months of 2006.

Computer and electronic manufacturers led the widespread losses in September, as sales plunged 11.9%. This was a notable reversal as manufacturers in the industry had reported gains in each of the previous three months.

Wood product manufacturers reported continued weakness, with sales dropping 4.9% to $2.0 billion in September. This was the third consecutive monthly decrease. Ongoing strikes in Western Canada were the most immediate cause for the drop, although soft lumber prices and slumping demand in the U.S. also had an impact. Sales of manufactured wood products have been falling steadily for the last three years since reaching $3.2 billion in August 2004.

Labour unrest in the wood manufacturing industry also had a spill-over effect on the paper manufacturing industry. Paper product manufacturers use many by-products from sawmills, and as a result of the strikes in Western Canada, some plants reported problems in procuring sufficient raw materials. Sales dropped 6.0% in September following gains in July and August.


Manufacturing sales decreased in seven provinces in September. Most of the weakness was focused on the East and West Coasts, with the interior provinces faring slightly better.

Provincial sales in Newfoundland and Labrador (-13.1%) and New Brunswick (-11.6%) tumbled in September. Sales in both provinces dropped largely due to decreases in the non-durable goods industries.

In the West, sales by manufacturers in British Columbia decreased 3.7% to $3.5 billion. Paper product manufacturers slumped 14.4%, losing $75 million in production compared to August. Wood product manufacturers continued to drop, losing 4.1% in September for a fifth consecutive monthly decline.

Saskatchewan and Ontario were the two relatively bright spots in September. Provincial manufacturing sales jumped 3.7% in Saskatchewan, exceeding $1.0 billion for the first time on record. Most of the gains in September were due to chemical manufacturers, and electric equipment, appliance and component manufacturers.

Sales in Ontario rose 0.7% in September, almost entirely due to a 9.7% rebound in sales by the transportation equipment industry.


For the first time since August 2006, manufacturers’ unfilled orders decreased. Despite falling 1.3% in September, unfilled orders remained 31.3% higher than September 2006. Unfilled orders are considered by many analysts as an indicator of future shipments, assuming orders are not cancelled.

Aerospace product and part manufacturers reported a 1.6% or $386 million drop in unfilled orders compared to August. However, many Canadian aerospace product manufacturers report their orders and sales in American dollars. Much of the decrease in unfilled orders was due to a rapidly changing exchange rate rather than a decrease in the volume of orders, as the U.S. dollar weakened significantly in September.

Computer and electronic product manufacturers reported a 6.5% drop in unfilled orders in September. A large part of the decrease was due to a major manufacturer moving much of its production to an out-of-country plant at the end of August.


New orders dropped 2.5% in September after plummeting 5.4% in August.

Computer and electronic product manufacturers had the most sizeable drop in new orders for the month, with a $464 million or 26.6% drop in new orders. This was largely due to a sizeable drop in unfilled orders compared to August.

New orders dropped 30.9% or $405 million in September for the aerospace product and parts industry. New orders in the aerospace industry tend to be highly volatile due to the size and frequency of major orders. In August, new orders also dropped sharply for aerospace manufacturers.


Manufacturers’ total inventories decreased 1.0% in September after a slight 0.3% decrease in August. September inventories fell $673 million to $66.1 billion. Despite this drop, inventory levels have been trending fairly flat over the past six months after decreasing slightly at the end of 2006 and during the first few months of 2007. The decrease in September was largely due to a 1.9% decrease in raw material inventories.

Inventory levels were down for most industries, with 16 of 21 industries reporting a drop. Aerospace products and parts manufacturers reported the largest decrease in inventories, down 5.4% to $4.7 billion. This erased the inventory build-up reported during the previous two months.

Inventories in the wood product industry continued to decrease, as work stoppages meant that many manufacturers had to rely on existing finished product inventories rather than production to generate sales. Inventories decreased 1.7% for a third monthly decline.

Inventories were also reduced by primary metal manufacturers, down 1.3% in September. Falling primary metal prices continued to play a significant role in the reported value of inventories. Both prices and inventories for primary metal manufacturers have decreased for five consecutive months.


The inventory-to-sales ratio remained at 1.31, unchanged since August. A 1.0% drop in inventories was counter-balanced by a similar-sized drop in manufacturing sales. The inventory-to-sales ratio started to decline in October 2006, moving from 1.36 to a 12-year low of 1.25 in March 2007. Since March, manufacturing sales have weakened while inventory levels have remained fairly stable, resulting in a subsequent increase to the current ratio.

The finished product inventory-to-sales edged up a p
oint in September to 0.45.

These ratios are a measure of the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.