MRO Magazine

Machinery manufacturers post 3.5% decline in sales in May; decreases are widespread


Industry

July 21, 2015
By Bill Roebuck
Bill Roebuck

Industries
Manufacturing sales for May 2015. Source: Statistics Canada

Manufacturing sales for May 2015. Source: Statistics Canada

Ottawa – Manufacturing sales edged up 0.1% to $49.9 billion in May 2015, while constant dollar sales fell 0.5%, indicating a lower volume of goods sold, according to the latest Monthly Survey of Manufacturing from Statistics Canada.

The slight increase in current dollar sales was the second gain in 2015. Sales were up in six out of 21 industries, representing almost half of the Canadian manufacturing sector.

Advances in aerospace and petroleum offset by multiple declines

Advances in aerospace product and parts as well as petroleum and coal products in May, were offset by multiple declines, most notably the chemical and machinery industries.

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Production in the aerospace product and parts industry rose 22.2% in May, after declining 18.0% in April. The aerospace industry is volatile relative to the manufacturing sector as a whole. The gain in May partly reflects changes in the value of the US dollar relative to the Canadian dollar, as sales and inventories are mainly reported in US dollars for the aerospace industry. Year to date, production has increased 7.4% compared with the same period in 2014.

Sales of petroleum and coal products rose 5.6%, mostly reflecting higher prices as reported by the Industrial Product Price Index. Prices fell from June 2014 to January 2015 for petroleum refineries, reaching a low in January. In May, prices were 14.0% higher than in January.

Lower sales in multiple industries offset the gains in aerospace and petroleum. Sales of chemical products fell 3.5%, reflecting in part a smaller seasonal increase than usual in the pesticides, fertilizers and other agricultural chemicals industry. Machinery manufacturers posted a 3.5% decline in sales and reported widespread decreases. Other industries posting lower sales included food and wood manufacturers.

Gains in Quebec offset by declines in Ontario

Gains in Quebec were offset by declines in Ontario in May. The other provinces reported relatively minor fluctuations, with the largest dollar gain in Alberta.

Sales rose 2.2% in Quebec, the second gain for the province in 2015. Higher production in the aerospace industry (+49.1%) was responsible for the growth in May. Year to date, aerospace production was up 8.9% compared with the same period in 2014. Lower sales of machinery products (-16.7%) offset a portion of the gains in aerospace.

Manufacturers in Alberta posted a 0.9% increase in sales, mainly as a result of gains in petroleum and coal products. Sales for the manufacturing sector in Alberta have been generally trending downwards ever since prices for petroleum refineries began to decline in July 2014. Sales for petroleum and coal products rose 6.6% in May and reached their highest level since December 2014.

Declines in multiple industries led to a 1.1% decrease in sales for Ontario manufacturers, the fourth drop for the province in 2015. Manufacturers in the transportation equipment industry posted the largest dollar decrease in May, down 1.1%, following two months of advances. Despite the downturn in May, sales of transportation equipment were 5.2% higher on a year-to-date basis compared with the same period in 2014. The provincial decrease also reflected lower sales of chemical products, machinery and computer and electronic products.

Inventories decrease after two consecutive gains

Inventories decreased 0.5% to $71.9 billion, following two consecutive gains. The decline reflected lower volumes of inventories on hand in the petroleum and coal industry.

The inventory-to-sales ratio edged down from 1.45 in April to 1.44 in May. The inventory-to-sales ratio measures the time, in months, that it would take to exhaust inventories if sales were to remain at the current rate.

Unfilled orders decline for fourth consecutive month

Unfilled orders fell 1.3% to $95.5 billion in May, the fourth consecutive monthly decline. The transportation equipment industry, in particular the aerospace industry, contributed to the monthly decrease. Orders fell 1.2% in transportation and 1.0% in the aerospace industry. Manufacturers in the fabricated metal and machinery industries also reported lower unfilled orders. The four months of declines represented a reversal of the previous upward trend for unfilled orders, which started in September 2014 and culminated in a record high in January 2015.

New orders rose 1.7%, as a result of growth in the aerospace product and parts industry. Gains in new orders for aerospace products partly reflected a stronger US dollar relative to the Canadian dollar. The advances were partially offset by declines in computer and electronic products, chemicals and fabricated metals.