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Friday, November 14, 2003

Monthly Survey of Manufacturing

September 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.

Shipments by province and territory
  August 2003 September 2003 August to September 2003
  seasonally adjusted
  $ millions % change
Newfoundland and Labrador 200 220 10.0
Prince Edward Island 97 124 27.6
Nova Scotia 711 712 0.1
New Brunswick 1,099 1,091 -0.7
Quebec 9,795 9,972 1.8
Ontario 21,058 22,844 8.5
Manitoba 951 983 3.4
Saskatchewan 603 641 6.4
Alberta 3,515 3,515 0.0
British Columbia 2,832 2,903 2.5
Yukon, Northwest Territories and Nunavut 6 5 -22.9

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.


Note to readers

In addition to current-month estimates, data for the previous three months are regularly revised. Factors influencing revisions include late receipt of company data, incorrect information reported earlier, replacement of estimates with actual figures (once available), and seasonal adjustments. Consult the appropriate CANSIM tables for revised data.

Non-durable goods industries include food, beverage and tobacco products, textile mills, textile product mills, leather and allied products, paper, printing and related support activities, petroleum and coal products, chemicals and plastic and rubber products.

Durable goods industries include clothing, wood products, non-metallic mineral products, primary metals, fabricated metal products, machinery, computer and electronic products, electrical equipment, appliance and components, transportation equipment, furniture and related products and miscellaneous manufacturing.

Unfilled orders are a stock of orders that will contribute to future shipments assuming that the orders are not cancelled.

New orders are those received whether shipped in the current month or not. They are measured as the sum of shipments for the current month plus the change in unfilled orders. Some people interpret new orders as orders that will lead to future demand. This is inappropriate since the "new orders" variable includes orders that have already been shipped. Readers should take note that the month-to-month change in new orders may be volatile. This will happen particularly if the previous month's change in unfilled orders is closely related to the current month's change.

Not all orders will be translated into Canadian factory shipments because portions of large contracts can be subcontracted out to manufacturers in other countries.


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.

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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%).

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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.

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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.

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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.

Available on CANSIM: tables 304-0014 and 304-0015.

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; manufact@statcan.gc.ca). To enquire about the concepts, methods or data quality of the release, contact Russell Kowaluk (613-951-0600; kowarus@statcan.gc.ca), Manufacturing, Construction and Energy Division.

Shipments, inventories and orders in all manufacturing industries
  Shipments Inventories Unfilled orders New orders Inventories-to-shipments ratio
  seasonally adjusted
  $ millions % change $ millions % change $ millions % change $ millions % change  
September 2002 44,134 0.6 62,320 -0.1 46,963 -1.2 43,541 -3.2 1.41
October 2002 44,132 0.0 62,580 0.4 46,491 -1.0 43,660 0.3 1.42
November 2002 43,385 -1.7 62,989 0.7 46,127 -0.8 43,021 -1.5 1.45
December 2002 42,998 -0.9 63,161 0.3 44,820 -2.8 41,690 -3.1 1.47
January 2003 44,520 3.5 62,929 -0.4 43,123 -3.8 42,823 2.7 1.41
February 2003 43,901 -1.4 63,307 0.6 42,807 -0.7 43,584 1.8 1.44
March 2003 44,070 0.4 63,368 0.1 42,616 -0.4 43,879 0.7 1.44
April 2003 42,953 -2.5 63,898 0.8 41,630 -2.3 41,967 -4.4 1.49
May 2003 42,285 -1.6 63,358 -0.8 40,057 -3.8 40,711 -3.0 1.50
June 2003 42,128 -0.4 62,635 -1.1 39,504 -1.4 41,576 2.1 1.49
July 2003 42,954 2.0 62,260 -0.6 39,055 -1.1 42,506 2.2 1.45
August 2003 40,866 -4.9 61,316 -1.5 38,398 -1.7 40,209 -5.4 1.50
September 2003 43,009 5.2 60,867 -0.7 38,827 1.1 43,438 8.0 1.42

Manufacturing industries except motor vehicle, parts and accessories
  Shipments Inventories Unfilled orders New orders
  seasonally adjusted
  $ millions % change $ millions % change $ millions % change $ millions % change
September 2002 35,787 1.5 58,808 -0.2 44,932 -1.6 35,056 -3.2
October 2002 35,834 0.1 59,130 0.5 44,532 -0.9 35,434 1.1
November 2002 35,260 -1.6 59,403 0.5 44,195 -0.8 34,923 -1.4
December 2002 35,740 1.4 59,410 0.0 42,967 -2.8 34,511 -1.2
January 2003 36,284 1.5 59,376 -0.1 41,307 -3.9 34,624 0.3
February 2003 35,825 -1.3 59,728 0.6 41,027 -0.7 35,546 2.7
March 2003 35,735 -0.3 59,873 0.2 40,886 -0.3 35,593 0.1
April 2003 34,914 -2.3 60,409 0.9 39,950 -2.3 33,979 -4.5
May 2003 34,350 -1.6 59,963 -0.7 38,451 -3.8 32,850 -3.3
June 2003 34,328 -0.1 59,323 -1.1 37,904 -1.4 33,781 2.8
July 2003 34,631 0.9 59,036 -0.5 37,462 -1.2 34,190 1.2
August 2003 33,966 -1.9 58,251 -1.3 36,796 -1.8 33,299 -2.6
September 2003 35,213 3.7 57,696 -1.0 37,269 1.3 35,686 7.2



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Date Modified: 2003-11-14 Important Notices