Manufacturing expected to increase in final Q: Stats Can

OTTAWA — Manufacturers are slightly more bullish about production prospects for the last quarter of 2005 based on increases in new orders, a higher backlog of unfilled orders and a decline in finished product inventories, according to a new Business conditions survey by Statistics Canada. However, lack of capacity continues to plague growing shippers.

The voluntary survey conducted in the first two weeks of October, to which almost 4,000 manufacturers responded, requests opinions on production impediments, finished product inventory levels, new and unfilled order levels, and production and employment prospects in the coming three months.

In October, 17 percent of manufacturers stated they would increase production in the fourth quarter while 15 percent expected to decrease production, leaving the balance of opinion at +2. This was a 4 point increase from the -2 balance posted in the July survey, says Stats Can. This was the first positive balance for production prospects since October 2004 (+11).

Manufacturers predict a good last leg for 2005

Led by producers in the transportation equipment, computer and electronic products and primary metal industries, 9 of the 21 manufacturing industries contributed to the more positive balance in production prospects. A lack of capacity continued to be an issue for some manufacturers.

Following three consecutive negative quarters, the October balance of opinion on the current level of orders received jumped 13 points to +4. Although positive, it was still lower than the +13 balance posted in the October 2004 survey. The number of manufacturers who stated that orders received were declining was just 10 percent in October, a significant improvement from 22 percent in July. Producers in the transportation equipment, electric equipment, fabricated metal products and computer and electronic products industries were the major contributors to the improved balance of opinion for orders received.
According to August’s Monthly Survey of Manufacturing, new orders for all manufacturing industries jumped 3.4% to just under $52.7 billion, the third increase in the last four months.

Manufacturers split on concerns with levels of unfilled orders:

With 20 percent of manufacturers expressing a lower-than-normal backlog and 20 percent stating a higher-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at zero in October, says the Stats Can report. This was a five point improvement from the July survey results.

Manufacturers less concerned with finished product inventories:

In October, 67 percent of manufacturers reported that the current level of finished product inventories was about right, down 5 points from the July level. Some 26 percent stated that inventories were too high, while 7 percent said inventories were too low. This left the balance of opinion at -19, a 5 point improvement over the July balance. According to August’s Monthly Survey of Manufacturing, finished product inventories edged down 0.3 percent to $22.2 billion — the first decrease since March 2005.

Manufacturers reported more production impediments:

The number of manufacturers reporting no production impediments decreased 5 points to 74 percent in October. The proportion reporting a shortage of skilled labour was up 1 point from July to 9 percent, a level unseen since the fourth quarter of 2000. What is really fuelling the number is a shortage of skilled labour in Alberta, according to Stats Can. Some 42 percent of manufacturers in Alberta indicated they were facing skilled labour shortages, up from 25 percent in July.