Ont., Que. manufacturers drag ’07 outlook down

OTTAWA — Like truckers, Canadian manufacturers overall don’t have high hopes that 2007 will be a great year.

Despite rising satisfaction with new orders, manufacturers’ prospects for production and employment are sinking for the first quarter of 2007, reports Stats Canada in its quarterly Business Conditions Survey.

The survey — which collects about 3,000 manufacturers’ opinions on production impediments, finished product inventory levels, new and unfilled order levels, and production and employment prospects in the coming three months — shows that the negativity for the first quarter of this year comes mainly from Ontario and Quebec.

In January, 18 percent of manufacturers stated they would increase production over the next three months, up 2 points from the October 2006 survey; while the number of those that would decrease production in the first quarter increased 1 point to 23 percent.

While business still looks to be down, manufacturers
reporting production impediments decreased 5 points

Producers of computer and electronic products, plastics and rubber products and transportation equipment were the major contributors to the negative balance. In all, 11 of the 21 manufacturing industries posted a negative balance for production prospects in the first quarter of 2007. Although not enough to offset declines, positive prospects were reported by manufacturers of primary metal, fabricated metal, petroleum and paper products, says StatsCan.

Meanwhile, the number of manufacturers reporting production impediments decreased 5 points to 23 percent in the January survey. The value of the Canadian dollar, competition from cheap imports and skilled labour shortages were among the factors cited.

Satisfaction With New Orders On the Rise:

While 25 percent of manufacturers indicated the current level of new orders was increasing, those stating the level of new orders was decreasing remained at 23 percent. As a result, the January balance of opinion jumped 15 points from the October survey to +2. The improvement in the balance was widespread, as 12 of the 21 industries indicated greater satisfaction with current levels of new orders. Producers in the transportation equipment, primary metal and chemical industries were the major contributors to the improved balance of opinion for orders received.

Although still negative, the January balance of opinion concerning the current level of unfilled orders increased 8 points to -11 from -19 in the October survey. Some 22 percent of manufacturers indicated that the current level of unfilled orders was lower than normal, while 11 percent claimed a higher than normal backlog. Opinion for unfilled orders has remained negative since July 2004.

Employment Outlook Still Negative:

Opinion for employment prospects for the next three months changed little, up 1 point to -4. Two-thirds of manufacturers stated that they would keep their current work force, 15 percent indicated they would increase it; and 19 percent indicated that they expected to drop employment in the first quarter of 2007.

Regionally, manufacturers expected slightly lower employment levels in Ontario (balance -15) and Quebec (balance -8), which offset positive balances in seven of the remaining provinces where manufacturers continued to express difficulty in finding skilled labour.