Conditions wearing down Canadian manufacturers

OTTAWA — Anxious manufacturers are expecting tougher times in the near future as the rapid appreciation of the Canadian dollar and record crude oil prices continue to take a toll.

As a result, says Stats Canada’s latest Business Conditions Survey, manufacturers were anticipating to lower production and employment levels in the first quarter of 2008.

The survey — conducted in the first two weeks of January with over 3,000 manufacturers — reveals that the proportion of manufacturers stating they would decrease production over the next three months stood at 33 percent, a 9 point jump from October. This was partially offset by 19 percent of manufacturers stating they would increase production, which was down 5 points from October.

The provinces were evenly split in terms of their production prospects with the big manufacturers, Ontario, Quebec and Alberta plus New Brunswick and Newfoundland and Labrador posting negative balances. Opinions were positive in the five remaining provinces, says StatsCan.

Producers of transportation and electric equipment, appliance and components industries were all major contributors to the pessimistic outlook. Bucking this negative trend were manufacturers in the primary metal industry, with 41 percent indicating they planned to increase production.

Satisfaction with New & Unfilled Orders Increases:

The number of manufacturers who stated that orders received were declining was down 4 points to 18 percent from the October survey. In contrast, those stating new orders were rising increased slightly, moved up by one point, to 20 percent this time.

The improved balance of opinion can be attributed mainly to primary metal and machinery industries. New orders for all manufacturing industries jumped 8.1 percent from October to just under $53.2 billion.

Also, 72 percent of manufacturers described the backlog of unfilled orders as normal, down four points from October. About 15 percent reported a lower than normal backlog, down two points. With the exception of the April 2007 survey, the balance of opinion for unfilled orders has been negative since October 2004, reaching a low of -23 in April 2005.

Less Concern With Finished Prods:

According to the survey, 83 percent of manufacturers reported that the current level of finished product inventories was about right, unchanged from October. Some 12 percent stated that inventories were too high, while 5 percent said they were too low.

Finished product inventories stood at almost $22.3 billion, down 3.8 percent from almost $23.2 billion posted one year earlier in the November 2006 survey.