Manufacturing improves slightly, but trend still on decline

OTTAWA — The year opened on a somewhat positive note for manufacturing after a dismal curtain call to close 2007, Stats Canada reports.

Trying to spring back from the three-year low posted in December, manufacturers started 2008 with a modest lift as sales increased slight by 1.3 percent in January to $49.3 billion.

However, notwithstanding January’s increase, manufacturing sales remained 7.1 percent below the recent peak reached in March 2007 ($53.1 billion) and with the exception of the previous month, January 2008 marked the lowest sales level since March of 2005.

Much of the weakness continues to come from the motor vehicle and parts industry, which has toiled against a number of production impediments in recent months and has been hampered by a softening US export market, retooling of assembly lines for new models and inventory control measures at the retail level.

But as the auto industry goes, so does much of the sector, as January’s modest improvement was driven mostly by an up-tick in motor vehicle sales. The segment lifted 4.5 percent to $3.9 billion, regaining some of the lost ground from the 25.6 percent collapse in December.

Overall, 16 of 21 industries posted increases for the month, representing just over three-quarters (76%) of total manufacturing sales.

Other positive movements in January were observed in the machinery and food manufacturing industries. After three consecutive decreases, machinery sales rebounded 5.8 percent to $2.7, while higher grain prices and record production from oilseed processors helped to push the sales of food manufacturers up 1.3 percent to $6.1 billion, says StatsCan.

On the flip side, production of aerospace products and parts fell 4.1 percent to $1.3 billion. Although this marked the second consecutive monthly decline, robust demand for aircraft and parts, based on record high unfilled orders, should keep manufacturers busy in the foreseeable future, predicts the agency.

Inventories On the Rise:

Manufacturers’ inventories increased 1.4 percent to $66.0 billion in January, due in part to producers of petroleum products replenishing their stocks, coupled with gains in the motor vehicle industry.

The increase in inventories was only the second in six months, as manufacturers have been gradually reducing their holdings over the past year.

Aerospace Dominates Unfilled Orders:

Led by aerospace, manufacturers posted yet another strong increase in unfilled orders. In January, the backlog of orders rose 3.6 percent to $59.5 billion, following impressive gains in November (+4.8%) and December (+2.3%).

Excluding the aerospace industry, total unfilled orders rose a more modest 1.0 percent.

The fabricated metal products (+2.6%) and computer and electronic products (+2.5%) industries also contributed to the overall increase in unfilled orders.