Tougher times looming for manufacturers: Stats Can

OTTAWA — Widespread dissatisfaction with current levels of orders in central Canada is leading a growing number of Canadian manufacturers to predict production cuts for the balance of 2006.

According to Stats Canada’s October Business Conditions Survey, manufacturers are less optimistic about production prospects than they were earlier this year. While 16 percent of manufacturers stated they would increase production in the fourth quarter of 2006, another 21 percent expected to slash such operations, leaving the balance of opinion at -5. This was a 5 point decrease from the zero balance posted in Stats Can’s July survey.

The survey is a quarterly report that requests the opinions of about 4,000 manufacturers on production impediments, finished product inventory levels, new and unfilled order levels, production and employment prospects in the coming three months.

The drop in confidence can be attributed to declines mainly in Ontario and Quebec, states the report, while most of the other provinces were positive.

Labor shortages and the high dollar are among the
production impediments cited by manufacturers

Lower global demand and factory prices contributed to diminish prospects in some industries, led by producers in the plastics and rubber products, primary metal, wood product and paper industries. In all, 10 of the 21 manufacturing industries contributed to the lowered balance for production prospects in the fourth quarter of 2006.

Satisfaction With Level of New Orders Declines:

While 10 percent of manufacturers stated the current level of new orders was increasing, 23 percent indicated a decrease — a 17 point drop from the July survey. This was the largest quarter-to-quarter drop in balance since a 28-point fall in the January 2001 survey. The drop was widespread as 16 of the 21 industries indicated lowered satisfaction with current levels of new orders.

Producers in the primary metal, fabricated metal product, plastics and rubber products, wood product and paper industries were the major contributors to the declining balance of opinion for orders received.

Greater Concern With Unfilled Orders:

The October balance of opinion concerning the current level of unfilled orders stood at -19, a 17 point decrease from the -2 posted in the July survey. Some 24 percent of respondents indicated that the current level of unfilled orders was lower than normal, while only 5 percent claimed a higher than normal backlog. Computer and electronic product, electrical equipment, wood product and paper industries were the major contributors to the falling opinion.

Finished Product Inventories More Stable:

Eighty-one percent of manufacturers reported, however, that the current level of finished product inventories was about right, only down 3 points from July. Some 14 percent stated that inventories were too high, while 5 percent said inventories were too low. This left the balance of opinion at -9, a 1-point improvement over the July balance.

Meanwhile, the number of manufacturers reporting impediments production keeps increasing. About 28 percent of respondents (5 points more than in July) made the statement, citing shortages of orders, the high value of the Canadian dollar and labour shortages in the western provinces were among the factors.