Monthly Survey of Manufacturing

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Factory shipments fell for the first time in three months in January as petroleum refiners and manufacturers of transportation equipment, principally automobiles, extended maintenance down-time into the New Year.

Manufacturers shipped goods worth an estimated $48.6 billion in January, down 2.1% from the previous month and 2.1% less than in January last year.

January's decline put the brakes on back-to-back rallies in the last two months of 2006, and completely wiped out gains made in December.

Taking price fluctuations into account, the volume of shipments fell 1.5% to $44.4 billion after showing strong growth in the two previous months.

Two sectors (transportation equipment and petroleum and coal industries) combined to account for the vast majority (96%) of January's decline.

Companies in the transportation sector shipped $9.6 billion worth of goods in January, down 6.0% from $10.2 billion in December, which had been the highest level in a year. Transportation companies also reported a $990 million decline in new orders in January.

Overall, shipments fell in 12 of 21 sectors, representing 57% of total output.

Shipments of durable goods dropped 2.8% to $26.7 billion following a strong fourth quarter last year. Shipments of non-durable goods fell 1.3% to $22.0 billion thanks to the decline in the petroleum and coal sector.

Manufacturing employment was unchanged in January as continued weakness in Ontario was offset by gains in Western Canada, particularly in Alberta and Manitoba, according to the Labour Force Survey. Employment in manufacturing has been on an upward trend in these provinces since February 2006.

Transportation halts after fourth-quarter comeback

Maintenance down-time beyond the normal holiday break for workers on car and truck assembly lines put the brakes on following a fourth-quarter comeback in the transportation equipment sector.

The biggest decline in the transportation sector occurred among car and truck manufacturers, whose output tumbled 8.0% to $5.1 billion.

At the same time, aerospace shipments fell 8.6% to $1.3 billion, following two consecutive gains.

Shipments of petroleum and coal products were down 8.1% in January, partly because of a 4.0% drop in prices, coupled with lower volume shipments from Canadian refineries.

Excluding the impact of the declines in transportation equipment and petroleum and coal, shipments in all other industries edged down 0.2% on small and widely dispersed movements.

Shipments down in six provinces, including the industrial heartland

Manufacturing shipments fell in six provinces in January, including the industrial heartland of Ontario and Quebec. However, the overall picture was mixed in Ontario and Quebec, where output fell in 11 of 21 industries in Ontario, and 12 of 21 in Quebec.

Shipments in Ontario tumbled 3.3% to $23.7 billion. More than half the decline was due to falling output in the transportation equipment sector, where shipments returned to normal levels after a $439-million gain in December. Other factors in transportation included weaker demand for trucks and falling sales in the motor vehicle parts manufacturing industry.

Ontario industries also recorded sizable decreases in output in petroleum and coal, plastics and rubber and machinery manufacturing industries.

In Quebec, shipments fell 3.7% to $11.5 billion as declines in the petroleum and coal, primary metals and the transportation equipment industries offset other gains. Shipments in the primary metals industry declined 2.8% to $1.7 billion in January, but this level was 12.5% higher than levels in January 2006. In the transportation equipment industry, shipments were off 7.3% to $1.4 billion. Again, this level was up 3.9% from January last year.

In Alberta, shipments rose 2.3% to $5.4 billion as 13 of 21 industries reported increases. The largest jump was in machinery manufacturing, mainly for oil and gas extraction, where output rose 18.6%. Other significant contributors to the increase were the chemicals and primary metals industries. These gains were offset by declines in the petroleum and coal products and the miscellaneous manufacturing industries.

In British Columbia, shipments slipped 0.4% to $3.5 billion with 12 of 21 industries reporting declines. The most significant drop was miscellaneous manufacturing, which includes such diverse industries as medical equipment and supplies, jewellery, sporting goods and office supplies; where output tumbled 29.4% to $76 million. This decline was partially offset by gains in output in the printing and paper industries and a 21.1% increase in the transportation equipment industry.

Manitoba shipments fell 1.3% to $1.3 billion as declines in the primary metals and transportation industries more than offset gains in food shipments. Saskatchewan shipments jumped 11.5% to $931 million on strong production of foodstuffs.

Shipments by manufacturers in the Atlantic provinces grew by 0.8% to $2.3 billion in January. Newfoundland and Labrador and New Brunswick both reported significant increases.

New orders tumble for transportation equipment

New factory orders declined 2.3% in January, slipping to $49.7 billion. This was led by a $990 million plunge in new orders for transportation equipment industries.

Orders rose in 16 of 21 industries, with the largest gain in the computer and electronics industry (+23.4%).

This was offset by declines in the motor vehicle and motor vehicle body and trailer manufacturing industries, where new orders fell by a combined $488 million.

Unfilled orders for aerospace at highest level in over four years

Unfilled orders increased 2.6% to $44.4 billion, the highest level since August 2002.

The transportation equipment sector, in particular aerospace and motor vehicles, typically accounts for half of all unfilled orders in the manufacturing sector.

Unfilled orders increased by $523 million in the transportation equipment industry in January. Unfilled orders in the aerospace industry rose by $490 million to their highest level in four years.

At the same time, unfilled orders for machinery increased 2.9% to $6.0 billion, the highest level in six years.

Inventories increase slightly

Total inventories for manufacturers rose 0.1% to $63.1 billion in January, the sixth increase in the last seven months to just below recent high levels.

An unseasonably warm December and early January in eastern North America allowed inventories of petroleum and coal products to rise in January. In spite of lower shipment levels in January, slow sales of motor vehicles led to higher inventories.

Companies in 12 of 21 industries reduced their inventories, with primary metals and plastics accounting for most of the drop.

By stage of fabrication, goods in process inventories have eased lower in five of the last six months. Inventories of raw materials increased after a four month slide, while finished products inventories fell 1.1% after rising steadily over the last six months of 2006.

Inventory-to-shipment ratio increase as shipments falter

The inventory-to-shipment ratio increased to 1.30 from 1.27 in December. The ratio had reached a peak of 1.33 in October, rising for three consecutive months before slipping in November.

Compared to a year ago, manufacturers shipped $1.2 billion less in January 2007 while holding nearly $1 billion more inventory. Finished product inventories stand $317 million higher in January 2007 compared to a year ago.

The inventory-to-shipment ratio is a key measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.

Available on CANSIM: tables 304-0014, 304-0015 and 377-0008.

Definitions, data sources and methods: survey number 2101.

All data are benchmarked to the 2004 Annual Survey of Manufactures.

Data from the February Monthly Survey of Manufacturing will be released on April 17.

For general information or to order data, contact the dissemination officer (toll-free 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 Michael Scrim (613-951-3197, scrimic@statcan.gc.ca), Manufacturing, Construction and Energy Division.

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