Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.
Friday, November 14, 2003
Monthly Survey of ManufacturingSeptember 2003
Higher shipments, rising orders, and the fifth successive decline in inventories were the highlights reported by manufacturers in September, as Ontario rebounded from the affects of August's electrical blackout. Shipments soared 5.2% to $43.0 billion in September, the highest level since March.
In September, manufacturers made up lost ground from the adverse impact of the electrical blackout of August 14. The Ontario economy was notably affected by the power outage and the following week of energy conservation. Assembly lines were shut down, plants and offices worked on reduced schedules and refineries closed. August's 4.9% decrease in total shipments was a one-time occurrence, largely due to the blackout.
Widespread increases in September
Increases were broadly based in September, as 17 of 21 manufacturing industries, representing 84% of total shipments, reported higher production. Ontario's rebound (+$1.8 billion) from the blackout led the nine provinces reporting increases in September. Even excluding Ontario's significant impact on the Canada total, manufacturing shipments still rose a healthy 1.8%.
Quebec (+$177 million), British Columbia (+$71 million) and Saskatchewan (+$38 million) also reported strong increases in September.
Quarterly shipments remain negative
Despite the upbeat tone of the September report, manufacturers were left with a dismal third quarter, rocked by the blackout in August. Shipments declined 0.4% in the third quarter, following a 3.9% drop in the second.
Manufacturers upbeat about their prospects for the fourth quarter
Manufacturing employment was little changed in the month of October, following a decrease in September (-15,000). A drop in employment by Ontario manufacturers was offset by slight increases in most other provinces. Since the start of 2003, the number of manufacturing jobs has fallen by an estimated 77,000 (-3.3%).
However, manufacturers were more upbeat about their employment and production prospects for the fourth quarter, according to the Business Conditions Survey for October. The vast majority of manufacturers (86%) indicated that they would maintain or add to their workforce in the coming quarter. The report also indicated that 34% of manufacturers would increase production in the fourth quarter.
Also encouraging was the fact that, in September, manufacturers loaded their books with an 8.0% boost in new orders, and noted that there was a rise in unfilled orders (+1.1%), the first since August 2002. Unfilled orders are often considered a key determinant of future shipments.
Some concerns linger
The Canadian economy has faced numerous challenges in 2003. The SARS virus, mad cow disease, forest fires and the electrical blackout have taken a toll on various sectors of the economy. Meanwhile, two of Canada's major manufacturing industries, motor vehicles and aerospace, continue to face diminished market demand, which has already contributed to substantial cuts in production.
There has been unease about the rapidly appreciating value of the Canadian dollar, which soared to a 10-year high in October. There are also some concerns regarding the US economy and the sustainability of its current recovery as the United States faces deficit challenges.
Big increases in shipments across the board
Motor vehicles (+16.2%), chemical products (+9.5%), computer and electronic products (+17.0%) and automotive parts (+7.1%) manufacturing were among the majority of industries reporting significant gains in September.
Manufacturers of motor vehicles recovered approximately two-thirds of the shipments lost in August (-23.1%) as a result of the blackout. Shipments increased to $5.2 billion in September, but on a year-to-date basis, they remain 4.2% off levels of one year ago.
Shipments of chemical products improved to $3.4 billion in September, the highest level since March. Manufacturers of petrochemical and pharmaceutical products contributed to the gains.
A quarter-end boost in computer manufacturing resulted in a stellar September for the otherwise beleaguered industry. Shipments of computer and electronic products climbed 17.0% to $1.7 billion in September, marking the third increase in the last four months.
Manufacturers continue to slice inventories
In September, manufacturers trimmed another 0.7% from inventories, the fifth consecutive decline. Inventories were $60.9 billion, the lowest level since April 2000 ($60.8 billion).
Manufacturers have successfully reduced inventory levels in recent months. Inventories were down 4.7% from April's recent high of $63.9 billion. All three stages of fabrication, including raw materials (-1.1%), goods-in-process (-0.7%) and finished-products (-0.2%), declined in September.
Finished-products inventories continue to drop
Manufacturers' finished-product inventories, which have been trending down throughout 2003, edged back to $19.0 billion in September, a 13-month low. Although lower levels of finished-product inventories are encouraging, the recent appreciation in the value of the Canadian dollar may be a key obstacle to further advances in demand from the United States, Canada's largest trading partner. This could hinder further reductions in finished-product inventories.
The main contributors to September's decrease included primary metals (-3.0%), aerospace (-1.6%) and petroleum and coal products (-7.3%).
Higher shipments improve the inventory-to-shipment ratio
Strong shipment activity coupled with lower inventories contributed to a notable drop in the inventory-to-shipment ratio to 1.42 in September from August's 1.50, the high for the year. The ratio has been quite volatile in recent months, the result of ongoing fluctuations in demand and the impacts of several external shocks. Since late 2002, the inventory-to-shipment ratio has been edging up.
The finished-product inventory-to-shipment ratio fell back to 0.44 in September from 0.47. September's solid rise in shipments surpassed the much smaller decline in finished-product inventories. The trend, which had been rising since mid-2002, has shown a more moderate movement in recent months.
The finished-product inventory-to-shipment ratio is a measure of the time that would be required in order to exhaust finished-products if shipments were to remain at their current level.
Unfilled orders increase for the first time in a year
Burdened by lacklustre demand and order cancellations since mid-2002, unfilled orders have weakened substantially in the last year. In September, manufacturers posted the first increase (+1.1%) in unfilled orders in over one year, to $38.8 billion.
Several industries benefited by September's rise in unfilled orders. A recent string of new order announcements by telecommunications manufacturers resulted in a 10.8% jump in unfilled orders for the computer and electronic products industry. Orders were $4.0 billion, the highest level in six months. The fabricated metal products (+6.4%) and plastics and rubber products (+14.1%) industries also reported strong increases in September.
Another noteworthy factor in the rise of unfilled orders was the aerospace products and parts industry. Since late 2001, aerospace manufacturing had been pummelled by the downward spiral of the global aviation market. In September, Canadian aerospace manufacturers eked out the first increase in unfilled orders since August 2001. Orders rose 0.4% to $11.3 billion.
New orders rocket ahead
Manufacturers reported an 8.0% rise in new orders to $43.4 billion in September. This marked the third increase in the last four months for new orders, a possible good omen for future prospects. Widespread increases were reported, including motor vehicles, computers and aerospace manufacturing.
Definitions, data sources and methods: survey number 2101.
The September 2003 issue of the Monthly Survey of Manufacturing (31-001-XIE, $17/$158) will be available soon.
Data for shipments by province in greater detail than normally published may be available on request.
All data are benchmarked to the 1998 Annual Survey of Manufactures.
Data from the October 2003 Monthly Survey of Manufacturing will be released on December 16.
For general information or to order data, contact the dissemination officer (1-866-873-8789; 613-951-9497; fax: 613-951-9499; firstname.lastname@example.org). To enquire about the concepts, methods or data quality of the release, contact Russell Kowaluk (613-951-0600; email@example.com), Manufacturing, Construction and Energy Division.