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Manufacturing sales in August erase recent gains

Ottawa, ON -- Manufacturers had a notable pull-back in sales in August 2008 following four consecutive monthly incr...


Ottawa, ON — Manufacturers had a notable pull-back in sales in August 2008 following four consecutive monthly increases, according to Statistics Canada in its latest Monthly Survey of Manufacturing study. Sales decreased 3.7% to $52.0 billion, erasing most of the gains from the previous two months. The largest contributor to the decrease was the petroleum and coal products industry, where sales have fallen by nearly one billion dollars in two months.

Manufacturing sales measured in constant dollars, which provide an indicator of volume, decreased for the first time in five months. Constant dollar sales fell 3.7% in August to $46.3 billion. August’s decrease erased all of the gains since December 2007, moving constant dollar sales to the lowest level in eight months.

Overall, the decreases in manufacturing sales were widespread in August, with 18 of the 21 manufacturing industries, accounting for 96% of total sales, reporting declines.

SIZEABLE SALES DROP BY PETROLEUM AND COAL PRODUCT MANUFACTURERS

Petroleum and coal product manufacturers accounted for almost one-third of the drop in manufacturing sales for the month. Petroleum and coal product sales fell 7.7% in August, decreasing by over $600 million. The drop was due to a combination of falling prices (-5.9%), and unplanned production slowdowns at two major plants.

Primary metal manufacturers also reported a sizeable 7.9% decrease in sales for August, the first decline in 10 months.

After several months of strengthening sales, the transportation equipment industry fell 4.3% in August. Sales by motor vehicle manufacturers decreased 4.3%, the first drop since March 2008. Aerospace product and parts manufacturers also decreased in August, with production falling 2.9% for a third consecutive monthly decline.

SALES DOWN IN MOST PROVINCES

In August, eight provinces saw manufacturing sales decrease. Only manufacturers in Saskatchewan and Manitoba managed to increase sales during the month, with gains of 5.7% and 1.0% respectively.

In the Atlantic provinces, manufacturing sales fell 15.4%. Sales were particularly weak in these provinces for manufacturers of food as well as petroleum and coal products.

Manufacturing sales in Ontario decreased 3.1% in August, although this was only the second drop in monthly sales for the province in 2008. Primary metal manufacturers had a 13.4% drop, reversing much of the increase from the previous month. The transportation equipment industry also reported lower sales in August as sales decreased 4.2% after three months of gains.

INVENTORY LEVELS CONTINUE TO CLIMB

Manufacturers reported a 0.3% rise in inventories in August, a sixth consecutive monthly increase. Inventories had trended downward throughout most of 2007 before the string of gains in 2008. Most of the increase in August was due to higher raw material inventories.

Aerospace products and parts (+4.1%) and chemical product manufacturers (+3.0%) accounted for most of the rise in total inventory levels.

The inventory-to-sales ratio had its largest one month increase since December 2007. The ratio rose substantially to 1.29 in August after dropping to the lowest level in over a decade in July. August’s level was still well below the recent peak of 1.34 recorded in December 2007.

Unfilled orders increased 2.5% compared with July. Unfilled orders have been rising fairly steadily over the past four years. Unfilled orders reached $65.7 billion in August, up 17.2% from year-earlier levels.

The increase in unfilled orders was entirely due to a 5.5% advance in aerospace products and parts. Excluding the aerospace industry, unfilled orders decreased 0.3% in August.

New orders slipped 1.1% to $53.6 billion after three months of gains.