Manufacturers say lack of capacity, higher buck leads to little change for ’06

OTTAWA — Canadian manufacturers were slightly more cautious in their outlook as they darted out of the gates for the first quarter of 2006 compared to the fourth quarter of last year.

According to Stats Canada’s Business Conditions Survey on manufacturing, fewer new orders, near record rates for capacity utilization, a strong Canadian dollar and continued competition from foreign imports were some of the challenges facing manufacturers in recent months. As a result, manufacturers do not expect to expand production in the first quarter of this year.

Computer and electronic sectors weigh
manufacturing down for 2006

The voluntary survey was conducted in the first two weeks of January and attracted almost 4,000 responses from manufacturers.

Some 15 percent of manufacturers stated they would increase production in the first quarter of 2006 while another 15 percent expected to decrease production, leaving the balance of opinion at zero. This was a 1-point decrease from the +1 balance posted in the October survey, which was the only positive one for 2005.

Manufacturers in the primary metal, chemical, plastics and rubber products industries were the most optimistic about production prospects for the first three months of 2006. A lack of capacity continued to be an issue for some manufacturers, the report states.

The balance of opinion concerning current levels of new orders dropped 3 points from the October 2005 survey. The number of manufacturers who stated that orders received were declining increased 4 points to 14 percent in January. Producers in the computer and electronic products industry were the major contributors to the lower balance of opinion for orders received.

In the January survey, 20 percent of manufacturers indicated they had a lower-than-normal backlog of unfilled orders compared to another 15 percent that had a higher backlog. Producers in the transportation equipment, and computer and electronic products industries, as well as in the primary metals and paper industries were the major contributors to the decrease. According to November’s Monthly Survey of Manufacturing, unfilled orders picked up 0.6 percent to just under $42.7 billion, the highest level in almost three years.

The number of manufacturers reporting no further production impediments increased 7 points to 81 percent in January. The proportion reporting a shortage of skilled labour was down 3 points in January to 6 percent.

What had been fuelling the number was a shortage of skilled labour in Alberta, the report found. Some 19 percent of manufacturers in that province indicated they were facing skilled labour shortages, down from 42 percent in October.

Comments by survey respondents in this category continued to relate to impediments caused by the high value of the Canadian dollar and competition with cheap foreign imports.