Manufacturing shipments jump in the West, retreat in Ont., Que

OTTAWA — Statistics Canada’s monthly manufacturing survey found that large declines in petroleum prices and continued volatility in the auto sector were the driving forces behind the 1.5 percent drop in manufacturing shipments ($51.4 billion) in November.

New orders also decreased a sharp 1.8 percent, due to weakness in the transportation equipment sector, Stats Can found.

The majority of provinces and the territories posted higher shipments in November with Alberta (+$68 million) and British Columbia (+$65 million) as the primary movers. Only three provinces reported lower shipments, but the big players were among them, notably Ontario and Quebec, which comprise three-quarters of the total value of Canadian shipments.

A decline in motor vehicle manufacturing
largely offset a surge in total shipments

In November, gasoline and fuel oil prices took a dive from record levels as refineries along the US Gulf Coast came back online following extensive production disruptions caused by the 2005 hurricane season.

An 8.7 percent decline in the price of petroleum and coal products at the factory gate, coupled with production slowdowns due to maintenance at some plants, reduced petroleum shipments by 10.8 percent to $4.5 billion.

Meanwhile, shipments of motor vehicles fell 5.1 percent to $5.9 billion in November. Recent volatility in the auto sector has made 2005 motor vehicle manufacturing unpredictable, according to Stats Can.

November’s decline in motor vehicle manufacturing largely offset a surge in shipments in October (+8.0%), which was partly driven by the rush to supply showrooms with 2006 models. The trend for motor vehicle shipments has weakened significantly in recent months.

Other industries reporting decreases in November included chemical products (-6.5%) and motor vehicle parts (-5.7%) manufacturing. Partly counterbalancing the overall decrease, shipments of primary metals surged 7.0% to $4.1 billion, due to strong global demand and rising industrial prices for primary metal products.

Most provinces posted higher shipments with
Alberta and British Columbia leading

Unfilled orders:

Although new orders abated substantially in November, manufacturers posted the highest level of unfilled orders in almost three years. Unfilled orders climbed another 0.6 percent to $42.7 billion, the ninth increase so far in 2005, and now stand at 16 percent above levels of one year ago.

The growing backlog of orders may be considered a positive sign, but it may also be an indication of the lack of additional production capacity in Canada’s manufacturing sector, says Stats Can.

Inventories:

Manufacturers’ inventories, which have been on a steady rise over the last two years, advanced another 0.6 percent to $66.2 billion in November. Since December 2003 ($58.5 billion), inventories have grown by $7.7 billion (+13.1%) in value.

The main contributors to the increase in inventories included the petroleum (+9.1%) and machinery (+2.2%) industries. Strong demand for copper, steel products, and other primary metals contributed to a 2.0% drop in inventories of primary metals, partly offsetting the overall rise in total inventories.

Inventory-to-shipment ratio:

The inventory-to-shipment ratio jumped to 1.29 in November from 1.26 in October. Substantially weaker shipment activity led to the sharp rise in the ratio, which remained just below the year-high of 1.31 set in July.

The inventory-to-shipment ratio is a key measure of the time, in months, that would be required in order to exhaust inventories if shipments were to remain at their current level, according to Stats Can.