OTTAWA — Manufacturers are expecting tougher times ahead according to the April Business Conditions Survey, published by Statistics Canada. Their pessimism is based mainly on their dissatisfaction with the current level of orders, the effects of the higher Canadian dollar, and substantial increases in the price of crude oil and other raw material inputs. As a result, manufacturers are anticipating lower production and employment levels in the coming three months, the report states.

Manufacturers report 2nd Q the most negative
production balance since Jan ’01

While 14 percent of manufacturers stated they would increase production in the second quarter of 2006 another 27 percent expected to decrease production, leaving the balance of opinion at -13. This was a 12-point decrease from the -1 balance posted in the January survey — the most negative balance of opinion since January 2001 when the balance stood at -23.

Manufacturers in the transportation equipment, primary metal, chemical, plastics and rubber products industries were the major contributors to the lower production prospects in the second quarter of 2006. A lack of capacity continued to be an issue for some manufacturers. According to the Industrial Capacity Utilization Rates, manufacturers operated at 84.7 percent of capacity in the fourth quarter of 2005.

Satisfaction with orders down:

In April, the balance of opinion concerning current levels of new orders dropped 5 points from the January survey to -5. This remained lower than the most recent high of +13 posted in the October 2004 survey. The number of manufacturers who stated that orders received were declining increased 5 points to 20 percent in April. According to February’s Monthly Survey of Manufacturing, new orders for all manufacturing industries were down 2.1 percent to just over $51.1 billion.

Ontario-Quebec experience biggest unemployment
fall in manufacturing sector

More concerns with unfilled orders:

With 22 percent of manufacturers expressing a lower-than-normal backlog and 12 percent stating a higher-than-normal backlog, the balance of opinion concerning the current level of unfilled orders stood at -10. Although this was down 4 points from January, it remains higher than the -23 registered in the April 2005 survey. Producers in the computer and electronic products industries, in addition to the chemical, plastics and rubber products industries, were the major contributors to the decreasing unfilled orders.

Employment outlook down slightly:

The balance of opinion for employment prospects for the next three months decreased 1 point to -2 in April. While 84 percent of manufacturers stated that they would keep or add to their work force, 15 percent indicated that they expected to decrease employment in the second quarter of 2006.

Regionally, manufacturers expected slightly lower employment levels in Ontario (balance -7) and Quebec (balance -7), which more than offset by gains in Manitoba (+21), Saskatchewan (+8), Alberta (+10) and British Columbia (+9) — where manufacturers still expressed difficulty in finding skilled labour.

Since the end of 2002, employment in manufacturing has fallen by 8.2 percent, with 189,000 fewer people working in this industry.