Monthly Survey of Manufacturing

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Manufacturing sales edged up 0.1% in October, basically holding steady after decreasing in five of the six previous months. Sales of manufactured goods increased $38 million, reaching $50.2 billion from $50.1 billion in September.

Using constant dollars, which take price fluctuations into account, the volume of sales increased 1.1% to $50.1 billion in October. The Industrial Product Price Index, which is a major component in calculating the constant dollar value, dropped 1.1% in October. Despite difficulties for manufacturers presented by the strengthening exchange rate, constant dollar sales were 3.2% higher than in October 2006.

On an industry-by-industry basis, 12 of 21 manufacturing industries increased in October, representing slightly less than half of total manufacturing sales.

Sales of non-durable goods gained 0.2% in October. This was the first increase for non-durable goods in the past five months. Durable good sales remained unchanged in October at $27.3 billion after increasing slightly in September.

Unfilled factory orders decreased 1.7% in October after a similar-sized decrease in September. New orders were virtually unchanged (-0.1%) in October, after losing ground during the previous two months.

October sales level out

Manufacturers reported a fairly even split on gains and losses during the month of October.

On a positive note, aerospace product and parts manufacturers reported an 8.4% jump in production during the month. This was the third consecutive monthly increase. The industry has shown significant strength in 2007, with production up 8.4% over the first 10 months of 2007 compared with the same period in 2006.

Miscellaneous manufacturers also fared well in October, with sales improving by 6.1%. Most of the strength during the month came from sporting goods manufacturers and jewellery and silverware manufacturers.

Petroleum and coal product manufacturers gained 2.0% in October, as production returned to normal levels at several plants following longer-than-anticipated shutdowns in September.

Manufacturing sales were pulled in the opposite direction, mainly by a 2.3% decrease in the transportation equipment industry. Sales by motor vehicle manufacturers were the key factor in this drop, decreasing by 5.8% in October.

Although sales by motor vehicle manufacturers decreased in October, year-to-date sales remained 1.2% higher than in the first 10 months of 2006. Motor vehicle parts sales were down 1.4% compared with September. Excluding motor vehicle and parts manufacturers, total manufacturing sales increased by 0.9% in October.

Provinces report mixed results in October

The picture across the country for sales of manufactured goods was mixed in October. Sales decreased sharply in Newfoundland and Labrador and Manitoba. In contrast, New Brunswick, British Columbia and Quebec experienced solid gains.

Manitoba experienced the largest decline in sales, falling 6.7% to $1.3 billion. Despite the decrease, year-to-date sales in Manitoba are still 9.6% above the same period in 2006.

Declines in sales were also prominent for Newfoundland and Labrador. The total value of sales tumbled 20.1% to $327 million, on the heels of a 14.0% drop in September. Lower sales in non-durable goods were the main cause of weakness in the province for both months.

On a positive note, sales in New Brunswick rose 7.1% to $1.4 billion, mostly reversing the sharp 11.4% fall in September.

Sales also advanced in British Columbia, rising 1.9% to $3.6 billion. Paper manufacturers benefited from a return to work within the wood industry as it improved their ability to procure raw materials, a by-product of the wood industry. Paper product sales rose $32 million (+7.2%) in October as a result.

Quebec reported a rise in sales of 1.0% to $12.2 billion, largely because of a $109-million sales increase in transportation equipment manufacturing. Strength in the fabricated metal products and beverage and tobacco manufacturing industries also contributed to the rise in sales.

Unfilled orders losing their lustre

Manufacturers' backlog of orders decreased 1.7% to $53.2 billion in October, after a similar-sized decrease in September. This was the first time manufacturers reported a back-to-back decrease in unfilled orders since May and June of 2006. Unfilled orders are generally considered an indicator of future strength of manufacturing sales, assuming they aren't cancelled. Before the recent decreases, the trend for unfilled orders had been steadily improving since the summer of 2006.

Aerospace product and parts manufacturers reported the largest decrease in unfilled orders for the month, losing 2.5%, or $578 million. This industry typically accounts for about 42% of total unfilled orders in Canada.

The strengthening Canadian dollar played a major role in the monthly decrease of unfilled orders. Many Canadian aerospace product manufacturers report their orders and sales in US dollars. As a result, most of the decrease was due to a 4.9% jump in the value of the Canadian dollar over its US counterpart in October, rather than a decrease in the volume of unfilled orders.

New orders slow their slide

New orders slowed their descent markedly in October (-0.1%). New orders have been steadily decreasing since the start of 2007, losing ground in eight of the past nine months.

The transportation equipment industry reported a 5.8% drop in new orders in October, with decreases in most sectors. The $546 million decrease within the transportation industry was the second sizeable drop in the past three months.

New orders for computer and electronic product manufacturers were the largest offsetting movement in October. New orders rebounded 19.5% for the month, after slumping 23.7% in September.

Inventory levels down for third consecutive month

Manufacturers' total inventories contracted for a third consecutive month, down by 0.7% in October. The reported value of inventories dropped $449 million to $65.3 billion. The decrease in October was largely due to a 1.8% decrease in finished goods.

Inventory levels started to trend downwards more noticeably in recent months after peaking in July 2006. Prior to the autumn of 2006, inventory levels had increased from 2004 to the summer of 2006.

Aerospace products and parts led the inventory decreases, reporting a drop of 4.8% to $4.4 billion. This was the second month of decreased inventories as manufacturers within the industry have reported three months of rising production.

The other industry reporting a sizeable decline in inventories was petroleum and coal product manufacturers. Inventories decreased 2.6% to $3.6 billion for the fifth drop in last six months.

Food products manufacturers were one of the few industries reporting a sizeable build-up of inventories. Levels rose 2.1% to $5.5 billion for the fifth gain in the past seven months.

Inventory-to-sales ratio decreases slightly

The inventory-to-sales ratio decreased slightly to 1.30, after reaching 1.31 in August and September. The inventory-to-sales ratio has been trending upwards over the past six months since dipping to a 12-year low of 1.25 in March.

The inventory-to-sales ratio is a measure of the time, in months, that would be required to exhaust inventories if sales were to remain at their current level. Over the past five years, the inventory-to-shipment ratio has ranged between 1.25 and 1.38. The current ratio levels are close to the five-year average of 1.32.

The finished-product inventory-to-sales ratio also decreased in October, returning to 0.44 after a brief sojourn at 0.45 in September.

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

Definitions, data sources and methods: survey number 2101.

Data from the November Monthly Survey of Manufacturing will be released on January 18, 2008.

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 Elton Cryderman (613-951-4317, elton.cryderman@statcan.gc.ca), Manufacturing, Construction and Energy Division.

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