Blackout Blackened Results for Ontario Manufacturers in August

The lights dimmed on manufacturers in August 2003, reports Statistics Canada in its monthly survey of manufacturing released Oct. 15, 2003. Shipments fell 4.5% to $40.9 billion, the lowest level since December 2001.

The aftermath of the electrical blackout in mid-August, which cloaked much of Ontario in darkness, was one of several factors contributing to the decline.

Shipments in Ontario plunged 7.8% (-$1.8 billion) to $21.2 billion in August. The decrease was notably due to the electrical blackout of Aug. 14, 2003, and its lingering impact. In the week that followed, Ontarians were requested to conserve power because of low energy supplies. Large decreases in shipments were reported by several industries, including motor vehicles, chemical products and food manufacturing.

Ontario led the six provinces reporting lower shipments in August. Excluding the significant influence of Ontario from the Canada total, manufacturing shipments decreased 0.8%. Quebec manufacturers posted a 2.6% drop (-$260.0 million) in August, the first since May. The transportation equipment and primary metals industries contributed to the decrease.

The Ontario blackout aside, manufacturers continued to cope with the effects of several short-range but significant shocks in recent months. The Canadian dollar began its ascent at the start of the year. Although the dollar has abated somewhat since the spring, it remains high and continues to jeopardize the profit margins of many Canadian manufacturers reliant on the export market.

In August, Canadian beef remained stalled at the border, as the international ban on exports of beef products continued. The ban was first imposed in late May following the discovery of a single case of bovine spongiform encephalopathy (BSE) in Alberta. In early September, the first shipments of some low-risk cuts of boneless beef crossed the border, as the United States agreed to a partial lifting of the ban.

In addition to these obstacles, market uncertainty remains in the motor vehicle industry. Manufacturers continue to partly gauge production and inventory levels through incentive-induced retail sales. Meanwhile, aerospace manufacturers continue to endure a very depressed global marketplace for new aircraft.

On the job front, manufacturing employment edged down 15,000 in September, bringing jobs losses so far in 2003 to 77,000 (-3.3%), according to the latest report of the Labour Force Survey. This contrasts with 2002, when manufacturing was the engine of job growth.

In August, 15 of 21 manufacturing industries, accounting for 68% of total shipments, reported decreases. Manufacturers of both durable and non-durable goods posted declines. Shipments of big-ticket durable goods fell 7.1% to $22.8 billion, the sixth decrease thus far in 2003. Non-durable goods shipments fell back 1.1%, wiping out July’s 0.5% gain.

Motor vehicle manufacturers suffered a major setback in August. Shipments plummeted 23.1% to $4.4 billion, following a healthy gain in July (+10.5%). Meanwhile, year-to-date shipments are down 4.7% from the same period of 2002.

Excluding the motor vehicle and parts industries, shipments fell a sizable 1.6% in August. The chemical products industry reported shipments of $3.1 billion, down 5.3% from July. The electricity blackout reduced shipment levels at many Ontario-based plants. In addition, some manufacturers had already curtailed production as a result of the high input costs of recent months.

The primary metals and aerospace products and parts industries also reported sharp declines in August. Shipments of primary metals fell 4.8% to $2.6 billion, a 19-month low. Meanwhile, production in the beleaguered aerospace industry decreased 9.6% to $924 million, the lowest level since March.