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Tuesday, December 16, 2003

Monthly Survey of Manufacturing

October 2003

Shipments decreased 1.1% to $42.5 billion in October, as manufacturers gave back some of the large gains of September. Against the backdrop of a rising Canadian dollar, manufacturers managed to reduce inventories (-0.6%) for the sixth consecutive month, but failed to fill their books with new orders (-3.2%).

Shipments tumble in October

October's decrease in shipments was broadly based, spanning 15 of 21 industries, accounting for 71% of total shipments.

A number of factors contributed to the pause in shipments. In some industries, October marked the return to more normal shipments levels following quarter-end boosts to production in September and the large bounce-back (+5.4%) after the Ontario blackout. Lower industrial prices in October also contributed to decreases in some industries.

Another key factor impacting export-reliant manufacturers was the appreciating value of the Canadian dollar against the US greenback, which reached a 10-year high in October. Many of Canada's manufacturing outputs are destined for US markets.

Shipments by province and territory
  September 2003 October 2003 September to October 2003
  seasonally adjusted
  $ millions % change
Newfoundland and Labrador 219 190 -13.6
Prince Edward Island 124 114 -8.0
Nova Scotia 716 706 -1.4
New Brunswick 1,081 997 -7.8
Quebec 9,889 9,789 -1.0
Ontario 22,905 22,685 -1.0
Manitoba 994 992 -0.2
Saskatchewan 647 653 0.8
Alberta 3,515 3,581 1.9
British Columbia 2,877 2,770 -3.7
Yukon, Northwest Territories and Nunavut 5 6 8.6

Ontario and British Columbia report the biggest decreases

Ontario led the eight provinces reporting lower shipments in October. Shipments fell $221 million (-1.0%) to $22.7 billion, following a 9.0% blackout-related recovery in September. Decreases in Ontario's computer and chemical industries offset a strong boost in food manufacturing.

Lower prices for paper and wood products contributed to a $107 million (-3.7%) decrease in shipments by British Columbia manufacturers. Quebec's shipments receded $100 million (-1.0%) in October, as a result of decreases in the computer and paper industries.


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.


US manufacturing on the road to recovery

In contrast to Canada's decline in shipments, manufacturers in the United States are in the midst of an economic recovery. Shipments rose 0.7% in October, the fifth increase in the last six months. Year-to-date shipments for 2003 were 2.1% above shipments in the same period of 2002. This compared with a 0.9% decrease in Canada over the same period.

The computer and electronic products industry (+2.6%) led the US durable goods sector in October and were at their highest level since April 2001. In addition, US unfilled orders jumped 1.6%, the eighth increase in the last nine months. Again, the computer industry led all industries in orders.

Time will tell if the robust recovery of the US manufacturing sector and of the economy in general will translate into increased production for their Canadian counterparts. The appreciated dollar will continue to challenge Canada's competitiveness in manufacturing.

Manufacturers hire workers in November

On a positive note, in November, Canadian manufacturers posted the largest employment gain in 12 months. According to the Labour Force Survey, manufacturing employment rose by 24,000 and was spread across several industries. Despite November's gain, factory employment remained 78,000 (-3.3%) below the level of November 2002. Employment was little changed in October.

November's employment increase supports the latest results of the Business Conditions Survey. The report indicated that the vast majority of manufacturers (86%) would maintain or add to their workforce in the fourth quarter.

Computer and motor vehicle manufacturing pull down shipments

Following September's quarter-end boost (+16.7%), shipments of computer and electronic products returned to more normal levels in October, dropping 12.1% to $1.5 billion. January-to-October shipments remained 15% below levels of the same period of 2002.

Motor vehicle manufacturing slipped 2.5% to $5.0 billion, following September's recovery (+16.2%) from the electrical blackout. Despite the introduction of 2004 models, attractive incentives and near-record low interest rates, motor vehicle sales have been slowing both in Canada and in the United States in recent months.

Lower industrial prices in October contributed to fewer shipments of chemical products (-3.0%) and petroleum and coal products (-3.3%).

Exports of boneless beef boost food shipments

Partly offsetting the decline in shipments for October, food manufacturers benefited from the re-opening of the US border to selected exports of Canadian beef products.

Shipments of boneless beef contributed to a 2.7% rise in food shipments in October, the first full month since the ban was partly lifted. Mexico also accepted Canadian beef exports as of October 2. Year-to-date shipments of animal slaughtering (excluding poultry) remained 11.3% below levels of 2002.

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Manufacturers continue to tighten inventories

In October, inventories fell to $59.9 billion, as manufacturers shaved another 0.6% from their stocks, the sixth decline in a row. In recent years, volatility in global demand has contributed to greater awareness and control of inventory levels. By October, manufacturers had sliced 6.2% in inventories since the recent high in April ($63.9 billion).

Inventories at all three stages of fabrication decreased in October. Goods-in-process inventories, which have been trending down since autumn 2002, fell 1.9% to $14.9 billion. Raw materials (-0.3%) and finished products (-0.1%) also declined.

The primary contributors to October's decrease included the aerospace (-3.5%), fabricated metal products (-2.7%) and wood products (-1.6%) industries.

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The inventory-to-shipment ratio remains near a 3-year low

October's drop in shipments offset lower inventories, contributing to a slight rise in the inventory-to-shipment ratio to 1.41, from September's three-year low (1.40). The ratio has settled down somewhat following recent volatility. Meanwhile, the trend of the inventory-to-shipment ratio has been edging down over the last few months.

The finished-product inventory-to-shipment ratio remained unchanged at 0.44 for the second consecutive month. This 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 decrease again

Unfilled orders fell 2.0% to $37.7 billion in October, a six-year low. This followed a 0.4% rise in September, the only increase in unfilled orders in the preceding 13 months. The main contributors included aerospace products and parts (-3.2%), computers (-6.1%) and plastics and rubber products manufacturing (-11.9%).

During the last year, order cancellations and weaker demand contributed to almost a 20% drop in the value of unfilled orders compared with one year ago. In October 2002, unfilled orders were $46.5 billion.

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Manufacturers receive fewer new orders in October

There were fewer new orders (-3.2%) on the books for manufacturers in October. Orders stood at $41.7 billion, following September's big boost in new order announcements (+7.6%). Widespread decreases were reported, led by the computer and plastics and rubber products industries.

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

Definitions, data sources and methods: survey number 2101.

The October 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 November 2003 Monthly Survey of Manufacturing will be released on January 21, 2004.

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  
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 42,897 1.8 62,085 -0.9 38,972 -1.3 42,365 1.9 1.45
August 2003 40,771 -5.0 61,085 -1.6 38,274 -1.8 40,073 -5.4 1.50
September 2003 42,974 5.4 60,320 -1.3 38,410 0.4 43,110 7.6 1.40
October 2003 42,481 -1.1 59,930 -0.6 37,660 -2.0 41,731 -3.2 1.41

Manufacturing industries except motor vehicle, parts and accessories
  Shipments Inventories Unfilled orders New orders
  seasonally adjusted
  $ millions % change $ millions % change $ millions % change $ millions % change
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 34,547 0.6 58,864 -0.8 37,383 -1.4 34,025 0.7
August 2003 33,868 -2.0 58,018 -1.4 36,677 -1.9 33,162 -2.5
September 2003 35,136 3.7 57,165 -1.5 36,864 0.5 35,323 6.5
October 2003 34,689 -1.3 56,810 -0.6 36,089 -2.1 33,914 -4.0



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Date Modified: 2003-12-16 Important Notices