MRO Magazine

Manufacturing sales fall to lowest level in past decade

Ottawa, ON -- Manufacturing sales decreased 5.4% to $41.7 billion in January 2009, falling to the lowest level in a...


Manufacturing

March 17, 2009
By MRO Magazine


Industries

Ottawa, ON — Manufacturing sales decreased 5.4% to $41.7 billion in January 2009, falling to the lowest level in almost 10 years. Motor vehicle and motor vehicle parts industries, particularly in Ontario, reported record decreases during the month. Excluding motor vehicles and parts and accessories, manufacturing sales decreased a more moderate 1.2% compared with December.

 

Constant dollar manufacturing sales, which are measured in 2002 prices, fell 6.4% to $38.1 billion in January. This was the sharpest decrease in constant dollar sales since the current series started in 1997.

 

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At the industry level, sales in 14 of 21 manufacturing industries decreased in January, accounting for about three-fifths of total sales.

 

Sales decreases centred in transportation equipment industry

 

The transportation equipment industry reported its largest monthly decline on record, falling 27.3% in January. Most of the decline was due to lower sales by motor vehicle (-46.3%) and motor vehicle parts manufacturers (-27.1%). Both sectors were faced with severe market downturns, which resulted in extended closures and slowdowns at numerous plants during the month.

 

Primary metal manufacturers also reported lower sales in January. Sales fell 10.5% in January, following decreases of 13.9% in December and 19.1% in November. Primary metal manufacturers have seen prices decrease steadily since August 2008, and the recent declines in sales have been exacerbated by weakening global demand.

 

Some sectors had a slight increase in manufacturing sales in January, following the decreases reported by 20 of 21 industries in December. Petroleum and coal product manufacturers reported a 7.2% increase compared with December. This was the first gain in seven months, as industry prices stabilized in January after having fallen about 50% between July and December 2008. In addition, food manufacturers saw sales increase by 4.4% after three months of declines.

 

Ontario leads declines

 

In January, six provinces reported lower manufacturing sales. Ontario reported the largest decrease, with sales falling by 11.3%. Excluding Ontario, manufacturing sales in the country edged down 0.3% compared with December.

 

Manufacturing sales in Ontario fell $2.3 billion dollars, mostly as a result of a record drop in motor vehicle and motor vehicle parts sales. Motor vehicle manufacturing sales decreased 46.9% or $1.5 billion, and motor vehicle parts sales decreased 27.2% or $367 million.

 

Manitoba (-4.9%) and British Columbia (-3.0%) had the other notable sales decreases during the month.

 

The Atlantic provinces posted mostly positive results, with sales up 2.3% in the region compared with December. Alberta also managed a slight gain in January, the first since September 2008. Sales rose 0.6% on a slight rebound in the chemical and petroleum product industries.

 

Inventory levels advance slightly

 

Inventory levels rose 1.2% to $67.1 billion in January, pulled higher by a 2.8% increase in goods-in-process. Inventory levels have generally been increasing since March 2008.

 

The increase in inventories was led by the transportation equipment industry. Motor vehicle manufacturers reported a 36.8% gain in inventory levels, while a
erospace product and parts inventories rose 3.3% in January.

 

Petroleum and coal products reported the largest decrease in inventories, down 5.2% compared with December.

 

The inventory-to-sales ratio rose 10 basis points to 1.61, moving well above the three-year average of 1.32. The inventory-to-sales ratio has increased by almost a third since July 2008. 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.

 

Unfilled orders becoming filled orders

 

The backlog of unfilled orders dropped for a second month, decreasing 3.0% compared with December. Unfilled orders fell to $67.4 billion, pulled lower mainly by the aerospace products and parts industry. Aerospace manufacturers reported some order cancellations in January, which partially accounted for the industry’s 4.1% or $1.5 billion drop in unfilled orders.

 

Excluding the aerospace industry, unfilled orders decreased 1.7% in January. Primary metals (-14.7%) and machinery manufacturers (-2.5%) posted the other notable decreases in unfilled orders during the month.

 

New orders decreased 6.7% to $39.6 billion in January, the lowest level since December 1998.

 

New orders for motor vehicles, motor vehicle parts, and aerospace products and parts were the leading causes of January’s decrease in new orders. The transportation equipment industry as a whole reported a 38.6% drop in new orders in January.