Manufacturers’ outlook up in face of hurdles

OTTAWA — Even with the highest Canadian dollar in almost 30 years, manufacturers remain resilient in their expectations for the balance of 2006.

According to Stats Canada’s latest Business Conditions survey, a modest improvement in the level of new orders and declining finished product inventories, saw manufacturers slightly more positive about production and employment prospects for the third quarter.

Strong global demand and soaring prices contributed
to the improved prospects in some industries

This, even though the number of manufacturers reporting production impediments increased slightly — 2 points to 23 percent. The appreciation of the Canadian dollar, higher raw material costs and labour shortages in the western provinces were among the factors cited.

While 20 percent of manufacturers said they would increase production in the third quarter of 2006 another 20 percent expected to decrease production, leaving the balance of opinion at zero. Still, this was a 12 point improvement from the -12 balance posted in the April survey.

Strong global demand and soaring prices also contributed to the improved prospects anticipated in some industries. During the first five months of 2006, manufacturers’ shipments of petroleum products were up 11.8 percent compared to the same period in 2005, while shipments in the primary metals industry soared 13.4 percent.

Manufacturers in the petroleum and coal products, transportation equipment, primary metal and chemical industries were the major contributors to the improved production prospects for the third quarter of 2006. A lack of capacity continued to be an issue for some manufacturers as they on average operated at 84.1 percent of capacity in the first quarter of 2006.

Satisfaction with level of orders:

With 18 percent of manufacturers stating the current level of new orders was increasing, and 14 percent saying the level of new orders was decreasing, the July balance of opinion climbed 8 points from the April survey to +4.

Producers in the petroleum and coal products, transportation equipment and electrical equipment, appliance and component industries were the major contributors to the improved balance of opinion for orders received.

Fewer concerns with unfilled orders:

With 11 percent expressing a lower-than-normal backlog and 8 percent stating a higher-than-normal backlog, the July balance of opinion concerning the current level of unfilled orders stood at -3, a 3 point improvement over April, reports Stats Can.

Producers in the computer and electronic products industries, in addition to the electrical equipment, appliance and component and primary metal industries were the major contributors to the increase.

Employment outlook up slightly:

While 83 percent of manufacturers stated that they would keep or add to their work force, 16 percent indicated that they expected to decrease employment in the third quarter of 2006. Regionally, manufacturers expected slightly lower employment levels in Ontario (balance -5) and Quebec (balance -9), which more than offset Manitoba (+13), Saskatchewan (+22), Alberta (+24) and British Columbia (+6), where manufacturers continued to express difficulty in finding skilled labour.