Monthly shipments round off year on a plus

OTTAWA — Canadian manufacturers ended 2006 on a positive note as factory shipments in December increased for the second month in a row thanks to strength in the transportation equipment sector.

Stats Canada reports, however, the year-end rally was not enough to offset several months of weak performances earlier in the year, and as a result, total shipments for 2006 as a whole edged down 0.6 percent to $587.4 billion from the peak level in 2005.

December’s increase was widespread, with 13 sectors representing 74 percent of total output improving. On a monthly basis, factories shipped goods worth an estimated $49.7 billion in December, up 1.7 percent from November. The transportation sector, led by automobiles, shipped $10.2 billion worth of product — the first time in 2006 that it had surpassed the $10-billion mark.

2005 had seen the highest level of constant dollar shipments on record while 2006 real shipments were more in line with 2003 levels.

Manufacturers started 2006 cautiously, according to the Business Conditions Survey through 2006, but became increasingly pessimistic as the year wore on. Coming off a stellar year in 2005, respondents to the opinion survey reported that the appreciation of the Canadian dollar, higher raw materials costs, and competition from cheaper foreign imports were growing impediments to production. Meanwhile, manufacturers in Western Canada listed a lack of skilled labor as a limiting factor to production, reviews StatsCan.

Transportation equipment highest in eight months:

Motor vehicle shipments increased 7.2 percent to $5.6 billion, driving the transportation equipment sector revival, now in its second month after four consecutive losses.

Despite a shaky first half of ’06, aerospace shipments picked up later, and most recently rose 4.1 percent to $1.4 billion in December, the second consecutive monthly gain.

Shipments up in seven provinces:

Ontario and Quebec continued to benefit from the resurgence in the transportation equipments sector in December. Overall, 12 of the 21 industries registered increases, but the transportation equipment sector contributed 58 percent of the $670 million increase.

In spite of similar solid growth in transportation, Quebec shipments still fell by slightly by 0.9 percent to $11.9 billion, as chemical shipments returned to normal levels after two months of stronger than normal demand. Quebec’s largest manufacturing industry, primary metals, also decreased returning to normal levels after high commodity prices elevated the value of shipments in November.

Shipments in Atlantic Canada grew by 1.4 percent to $2.3 billion. Newfoundland and Labrador accounted for the majority of the increase in December.

Shipments from Alberta increased 1.8 percent to $5.3 billion with 15 of 21 industries reporting increases — largest of which was in petroleum and coal products, which advanced 4.9 percent to $1.1 billion. Other significant contributors were the chemicals industry, non-metallic mineral and the primary metals. These gains were offset by 11 percent decreases in the paper and the computer and electronics industries.

Inventory info:

Total inventories for manufacturers decreased 0.6 percent to $63.1 billion after five consecutive increases. Inventories were drawn down in 13 of 21 industries, with petroleum and coal accounting for two-thirds of the drop. Food product inventories have risen in eight of the last nine months, while aerospace product and parts inventories have risen through the fourth quarter of 2006.

Meanwhile, the inventory-to-shipment ratio fell to 1.27 from 1.30 in November. The ratio had peaked at 1.33 in October, rising for three consecutive months before turning back in November. The average inventory-to-shipment ratio for 2006 was 1.28, 0.38 higher than the average level for 2004 and 2005.

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