MRO Magazine

Manufacturing struggles for a modest increase in January

Ottawa, ON -- After closing out 2007 on a dismal note, manufacturers started 2008 with a modest but positive lift, ...


March 24, 2008
By MRO Magazine


Ottawa, ON — After closing out 2007 on a dismal note, manufacturers started 2008 with a modest but positive lift, reports Statistics Canada. Manufacturing sales increased by 1.3% in January 2008 to $49.3 billion, as the sector struggled to spring back from the three-year low posted in December 2007 (-3.7%).

Notwithstanding January’s increase, manufacturing sales, which have been trending downward for much of the last year, remained 7.1% below the recent peak reached in March 2007 ($53.1 billion) and with the exception of the previous month, January 2008 marked the lowest sales level since March of 2005. Much of the weakness continued to come from the motor vehicle and parts industry, which has toiled against a number of production impediments in recent months.

Overall, 16 of 21 industries posted increases for the month, representing just over three-quarters (76%) of total manufacturing sales. Both durable (+1.8%) and non-durable (+0.8%) goods industries contributed to reversing the downward movement.

At 2002 prices, manufacturing sales increased 2.0% to $47.7 billion in January, the first monthly increase since October, and only the second positive movement in the past six months. Increases aside, the volume of goods shipped were still 3.5% below the levels of a year earlier.



The motor vehicles industry was the primary driver of January’s increase. Manufacturing sales of motor vehicles lifted 4.5% to $3.9 billion, regaining some of the lost ground from the 25.6% decline in December. December aside, motor vehicle manufacturing stood at its lowest level in almost a decade. A number of factors, including a softening US export market, retooling of assembly lines for new models and inventory control measures at the retail level, continued to affect several of the key producers.

Other positive movements in January were observed in the machinery and food manufacturing industries. After three consecutive decreases, machinery sales rebounded 5.8% to $2.7 billion on the strength of widespread gains. Higher grain prices and record production from oilseed processors helped to push the sales of food manufacturers up 1.3% to $6.1 billion.

On the flip side, production of aerospace products and parts fell 4.1% to $1.3 billion in January. Although this marked the second consecutive monthly decline, robust demand for aircraft and parts, based on record high unfilled orders, should keep manufacturers busy in the foreseeable future.

Manufacturing sales by the chemical industry also slipped in January, losing 1.4% to $4.1 billion. This marked the third decrease in four months. Petrochemical and fertilizer manufacturers were the primary catalysts of the drop.


Manufacturing sales increased in seven provinces in January, as the moderate gains were widespread.

Ontario (+2.0%) and Quebec (+1.2%) were both integral to the $633 million (+1.3%) lift in January sales, accounting for almost 97% ($612 million) of the total jump. The Central provinces showed considerable resilience for the month, as both Ontario and Quebec were the primary contributors to December’s woeful sales performance.

Ontario was buoyed primarily by motor vehicles (+5.5%) and machinery (+10.0%) producers, while Quebec was bolstered by significant movements in electrical equipment (+12.0%), paper (+8.0%) and food (+2.7%) manufacturing. The downward rollercoaster ride of the big two provinces continued to show volatility, as both have seen nearly as many positive as negative sales movements in the past 12 months.

Manufacturing sales in the Western provinces were led by Alberta (+0.9%) in January, as a 2.0% price increase assisted petroleum and coal product manufacturers’ exceptional performance in the stalwart oil patch. Newfoundland and Labrador’s manufacturing sector also posted a healthy gain (+7.7%).

Provinces that reported decreased sales included New Brunswick (-5.6%), Manitoba (-0.8%) and British Columbia (-0.4%).


Manufacturers’ inventories increased 1.4% to $66.0 billion in January, due in part to producers of petroleum products replenishing their stocks, coupled with gains in the motor vehicle industry. All three stages of fabrication were up for the month, as finished product (+1.8%), raw materials (+1.3%) and goods in process (+0.8%) lifted inventories over December levels.

January’s increase in inventories was only the second in six months, as manufacturers have been gradually reducing their holdings over the past year. The trend for inventories, which had been downward since the fall of 2006, has levelled off in recent months.

Inventories of petroleum and coal products jumped 12.0% to $4.5 billion in January, as manufacturers kept pace with strong demand. Excluding the petroleum industry, total manufacturing inventories rose a moderate 0.7%. Also posting a solid gain were manufacturers of motor vehicles (+11.0%), as some makers reported that they were beginning to build up inventories in anticipation of higher production following the recent slowdowns.


Following a sizeable jump in December, the inventory-to-sales ratio remained constant in January at 1.34. The boost in inventories (+1.4%) slightly outpaced that of sales (+1.3%) in January, contributing to the stability of the ratio.

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

As the manufacturing sector showed some signs of weakness over the later half of 2007, the inventory-to-sales ratio has been edging higher. As of January, the ratio was at its uppermost level since the recent high observed in October 2006 (1.36).


Led by aerospace, manufacturers posted yet another strong increase in unfilled orders. In January, the backlog of orders rose 3.6% to $59.5 billion, following impressive gains in November (+4.8%) and December (+2.3%).

Robust demand for aircraft and parts continued to fill manufacturers’ orders books. The aerospace products and parts industry posted a 6.8% boost in unfilled orders to a record $27.8 billion. In January, orders stood in excess of $9.5 billion higher than the level of one year earlier.

Excluding the aerospace industry, total unfilled orders rose a more modest 1.0%.

The fabricated metal products (+2.6%) and computer and electronic products (+2.5%) industries also contributed to the overall increase in unfilled orders.


The level of new orders made up some ground in January, rising 2.9% to $51.4 billion. This followed December’s big decline (-5.9%).

Despite the increase, new orders have weakened substantially over the last year as January’s level remained 8.6% below that of one year earlier.

New orders of aerospace products and computer equipment were the key contributors to January’s gain.

For general information or to order data, contact the dissemination officer at Statistics Canada (toll-free 1-866-873-8789; 613-951-9497; fax: 613-951-9499;