MRO Magazine

Machinery sales declined 8.9% in January yet were the highest of any January since 1992


Industry

March 17, 2015
By Bill Roebuck
Bill Roebuck

Industries

Mfg Sales Jan15Ottawa – Manufacturing sales fell 1.7% in January 2015, led by a price-induced decline of 11.9% in sales of petroleum and coal products, according to the latest Monthly Survey of Manufacturing from Statistics Canada. Lower sales of machinery, chemicals and primary metals also contributed to the decline. Excluding petroleum and coal products, manufacturing sales fell 0.5%.

Sales were down in 14 of 21 industries, representing just under half of all Canadian manufacturing.

Constant dollar sales were down 1.0%, indicating that a lower volume of products was sold in January.

Large declines in petroleum and coal prices lead to lower manufacturing sales

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Sales in the petroleum and coal product industry fell 11.9% in January, the seventh consecutive monthly decline. An 11.4% drop in prices, as measured by the Industrial Product Price Index, coupled with a small decline in volumes, led to lower sales. Sales in the industry dropped 35.0% in the past seven months, reaching their lowest level since May 2009.

Machinery sales declined 8.9% in January, following a 10.4% increase in December. It is common for manufacturers in this industry to take many months to build a single piece of equipment. Some machinery manufacturers that reported large sales in December to close out the year had significantly lower sales in January as work began on new projects. Despite the drop, January 2015 sales were the highest of any January since the series began in 1992.

Manufacturers of chemicals reported that sales in January were 4.5% lower than in December. This was the fifth decline in six months. Sales of chemicals were at their lowest level since April 2013. Respondents indicated that price declines in January played a role in the lower sales reported by some sub-industries.

Primary metal sales fell for the fourth time in six months. Sales dropped 4.3% in January and were 11.0% lower than their most recent high in September 2014. The decline was volume based as prices increased 3.2% in the industry.

Partially offsetting lower sales in these industries was aerospace products and parts production, which rose 21.7%. This increase was largely due to an exchange rate effect generated by the sharp appreciation of the US dollar.

Sales of other transportation equipment rose 30.1% in January. This was the second consecutive gain, as sales reached their highest level in six months. Sales of computer and electronic products rose 5.3% to their highest level since October 2011, while food sales rose for the fifth time in six months and reached a seven-month high.

Sales down in eight provinces

Sales fell in eight provinces, with Ontario and Alberta posting the largest declines.

Sales in Ontario were 2.3% lower in January as manufacturers in 16 of 21 industries reported lower sales. This was the province’s fourth decline in six months, with monthly sales dropping more than $1 billion since July. The largest declines in January occurred in the machinery, transportation equipment and chemical industries.

In Alberta, sales were down 7.6%, reflecting a 26.0% drop in the sale of petroleum and coal products. The decline in petroleum and coal product sales was attributable to both prices and volumes, as the price of petroleum and coal products fell 11.4% and refineries in the province reported lower volumes of goods sold. Despite the overall decline, sales rose in 11 of 21 industries in Alberta.

The declines in Ontario and Alberta were partially offset by a 3.2% sales increase in Quebec. A rise in the production of aerospace products and parts drove the provincial gain.

Inventories rise

Inventories rose 2.2% in January to $71.6 billion as manufacturers in 19 of 21 industries reported higher inventories. Inventories recorded their third increase in four months and were at their highest level since July 2014.

The largest inventory increase occurred in the aerospace industry, reflecting the lower value of the Canadian dollar. Inventories of aerospace products and parts rose 9.8% to $8.7 billion. Primary metal, motor vehicle, machinery, and motor vehicle parts inventories also rose.

Partially offsetting the increases was a 9.5% decline in inventories in the petroleum and coal product industry. While volumes of inventories held in the industry rose, prices for raw materials and finished goods in the industry fell considerably, leading to the overall decline in inventories.

The inventory-to-sales ratio rose from 1.34 in December to 1.39 in January. The inventory-to-sales ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders rise

Unfilled orders rose 7.2% in January to an all-time high of $97.2 billion. The increase reflected a 10.6% jump in the aerospace product and parts industry. Unfilled orders are largely held in US dollars in the industry. The sharp rise in the value of the US dollar increased the Canadian-dollar value of those unfilled orders.

Unfilled orders were up 4.1% in the fabricated metal product industry and up 2.4% in the machinery industry.

New orders rose 12.1% in January to $58.0 billion, as a result of increases in the aerospace product and parts industry.