Oil, metals keep manufacturers treading in ’07: Report

OTTAWA — Soaring industrial product prices and robust demand for resource-based goods offset declines in some of Canada’s key durable goods industries in 2007.

In its year-end review on manufacturing, Stats Canada noted that overall, there was little change in both the volume and value of manufacturing sales last year.

The report, published today in StatsCan’s Analysis in Brief series, notes how manufacturers posted a modest 0.4 percent increase in sales to $613.4 billion. In constant dollars, factory sales were essentially flat, following a lacklustre 2006 in which sales edged down.

In other respects, manufacturers had a mixed year. Employment fell by an estimated 55,300 jobs and total hours worked declined 2.9 percent. However, labor productivity in the sector increased 1.9 percent. And while capital investment slid, operating profits also edged up, halting two consecutive years of declines.

As in previous years, manufacturers faced several major challenges, including the rising exchange value of the Canadian dollar and the weaker export market in the U.S., which has been affected by the ongoing sub-prime mortgage situation and declining consumer confidence.

The food industry was still Canada’s largest manufacturing industry in terms of sales — up 2.9 percent to $74.2 billion, following a healthy 6.8 percent gain in 2006. However, the petroleum and coal products industry surpassed motor vehicles for the first time to become the second largest.

Between 2003 and 2007, prices for both petroleum and coal products and primary metals have soared about 65 percent. Without these two industries, total manufacturing sales would have declined 1.1 percent in 2007, after a 1.4 percent drop in 2006.

On average, the industrial price of primary metals rose just over 10 percent, following industrial booms in China and India, which has fortified prices for such commodities as nickel, gold and other primary metals.

Central Canada’s dominance as the manufacturing
heartland “weakened ever so slightly” says Statscan

Sales of wood products plunged to their lowest level since 1996 (down 15.6 percent to $24.9 billion), while car and truck makers continued to sputter, posting lower sales compared with 2006.

With that, Central Canada’s dominance as the manufacturing heartland “continued to weaken ever so slightly, as the western provinces capitalized on strong demand for their high-priced resources,” notes the report.

Manufacturing activity in the West rose a moderate 0.6 percent in 2007, while sales west of Ontario accounted for 22 percent of the national total, up from 19 percent in 2003.

Ontario, while reeling, remains the leading manufacturing province, accounting for almost 48 percent of the national sales total — well below the proportion of 55 percent in 1999.

Meanwhile, operating profits halted a two-year downward trend last year, rising 5.4 percent to $45.0 billion, the highest level since 2004.

In fact, manufacturers’ profits outperformed the 5 percent growth in profits seen by Canadian non-financial corporations as a whole, says Statscan.