Challenges weigh down manufacturers in 2005

OTTAWA — For Canadian manufacturers and their service providers, 2005 will be remembered as a year of many challenges as they coped with the highest value of the Canadian dollar in over a decade, soaring input costs, and record high prices for petroleum.

Because of the challenges, manufacturing shipments rose only 3.1 percent overall to $611.6 billion in 2005, compared to an 8.5 percent advance in 2004, reports Statistics Canada.

As 2005 drew to a close, volatility in the manufacturing sector continued. In December, manufacturers stepped up production with gains in the petroleum products and auto parts industries, although shipments essentially bounced back from a weak November.

Thousands of factory jobs have been lost over the last year, as the sector attempts to restructure itself.

Despite setbacks, auto assembly remained Canada’s
largest manufacturing industry in 05

December’s boost in shipments was widespread as 15 of 21 industries, accounting for three-quarters of total shipments, posted increases.

Nondurable goods industries, led by petroleum products, saw shipments increase by 1.7 percent to $22.8 billion. However, petroleum prices have declined 14 percent since their September peak. Manufacturers of big-ticket durable goods also reported higher shipments in December, rising 1.1 percent to $29.3 billion.

The assembly of motor vehicles remained Canada’s largest manufacturing industry in 2005. Shipments were $69.7 billion, down 3.5 percent compared to 2004. Stiff competition, in addition to production slowdowns at some plants, contributed to the year-over-year drop.

Food manufacturers reported slightly lower shipments (-0.4%) of $68.4 billion for the year. Labour strife in the meat products industry partly contributed to the decrease in food shipments overall.

Rounding out the top five manufacturing industries in 2005 were petroleum, chemicals and primary metals. High demand, coupled with global supply concerns, drove up the value of petroleum and coal product shipments 21.6 percent to a record $54.7 billion in 2005.

Manufacturers of chemical products posted shipments of $47.9 billion, 5.0 percent higher than in 2004, while intense global demand for Canada’s primary metals increased shipments by 4.1 percent to $46.4 billion.

Province-by-province:

Although six provinces reported lower shipments in December, big gains in Ontario, Alberta and British Columbia were more than enough to offset the overall declines.

Shipments in Ontario rose by $526 million (+2.0%) to close the year at $26.3 billion, but December’s pick up followed a 3.0 percent drop in November. Despite the year-end rush, Ontario’s manufacturers posted a lacklustre 2005; shipments were up only 1.0 percent for the year.

Sweeping gains contributed to a healthy December in Alberta and British Columbia. Shipments in Alberta surged by $149 million (+2.9%) to $5.4 billion, marking the fifth successive increase in the province’s manufacturing sector. In British Columbia, shipments rose by $113 million (+3.1%) to $3.8 billion. The dominant wood and paper industries contributed to the increase.

Meanwhile, declines in Quebec (-$55 million) and Manitoba (-$46 million) manufacturing sectors partly offset some of the rise in total shipments.

Backlogs:

Manufacturers’ backlog of unfilled orders was essentially unchanged in December at $42.5 billion, down a modest 0.1 percent from November.

Working through contracts received earlier in the year, the machinery (-3.3%) and fabricated metal products (-3.7%) industries drew down their unfilled orders in December.

On the positive side, demand for new aircraft and parts, as well as heavy-duty trucks contributed to a 1.1 percent gain in unfilled orders for aerospace manufacturing and an 8.5 percent boost in orders for motor vehicles, notably heavy trucks.

Inventories edge down:

Inventories fell for only the second time in 2005, edging down 0.2 percent to $66 billion in December. Inventories had been steadily accumulating since early 2004.

A 0.9 percent surge in finished product inventories to $22.1 billion was more than offset by decreases in raw materials (-0.9%) and goods-in-process (-0.4%) inventories.


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