Up and Away: Aerospace spike keeps manufacturing steady

OTTAWA — A weak manufacturing month this past May was overshadowed by a big boost in aerospace products production, Stats Canada reports in its monthly survey on manufacturing.

Global demand for domestic and military-related aircraft and parts has been fuelling the strength in aerospace manufacturing since early 2005. “Loaded with orders, aerospace production has been quite volatile in recent months, and has contributed to investment in plants and the hiring of additional staff in the once beleaguered industry,” reports the agency.

Shipments advanced 0.3 percent to $50.9 billion in May, on the heels of widespread gains in the aerospace industry. The production of aerospace products and parts soared 79.8 percent to $1.6 billion in May, following a 36.6 percent drop in April.

New orders in the aerospace industry doubled in May, making up for most of the ground lost in April.

Without the aerospace products and parts industry, a very different picture emerges. Shipments dropped 1.1 percent excluding aerospace, pulled down by the petroleum and motor vehicle industries.

The trend for shipments, although negative, has been relatively stable in recent months. In May, only 10 of the 21 manufacturing industries, accounting for 61 percent of total shipments, posted increases.

The primary metals industry also posted a 4.1 percent gain in shipments to $4.6 billion in May, due to escalating industrial prices. Sky-high demand for copper, nickel, zinc and aluminum fueled the surge.

The petroleum and motor vehicles industries counterbalanced some of the gains in May, however.

Refinery shutdowns for maintenance contributed to a substantial 6.7 percent drop in shipments of petroleum and coal products to $4.6 billion, while motor vehicle manufacturers gave back all of April’s gains (+2.7%) as shipments fell by 5.2 percent to $5.0 billion — the third decrease in five months, according to Stats Can.

Inventories expand:

Manufacturers’ total inventories bounced back by 1.6 percent to $66.9 billion, following a 0.6 percent drop in April. May’s increase in the inventory level was the largest in a year and a half. Strength in the aerospace industry (+16.0%) was the main contributor.

Unfilled orders decline, but levels remain healthy:

For the second month in a row, unfilled orders weakened. The backlog of orders fell 0.7 percent to $42.4 billion, slowing somewhat from April’s drop of 1.1 percent. Despite recent slowdowns, the average annual level of unfilled orders remains almost 10 percent higher in 2006 when compared to one year ago.

Inventory-to-shipment ratio on upward trend:

The inventory-to-shipment ratio edged up to 1.31 from 1.30 in April, equaling its recent high of last February.

“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,” reports Stats Can.