OTTAWA — Despite a perfect storm of challenges including rapid currency appreciation, rising energy costs and a softening US export market, Canada’s manufacturing sector managed to stay afloat in 2007, Stats Canada reports.

Still, though, the year ended with a thud as manufacturing sales dropped 3.4 percent to $48.6 billion in December, the lowest level in three years. Longer-than-normal shutdowns at several motor vehicle plants were the primary source of the deep cut in sales.

December’s decline was the largest since August 2003, when a widespread electrical blackout and its fallout thereafter impacted much of Ontario’s production during that month.

Despite ongoing strength in key price-driven industries, overall manufacturing activity decreased in four of the last five months, due in part to some significant cuts in the volume of goods manufactured.

The majority of manufacturing industries were battered in December as 16 of the 21 industries posted lower sales, accounting for almost two-thirds of total sales.

Going forward, the impending recession in U.S. could continue to have a detrimental impact on the Canadian manufacturing sector, says StatsCan.

Accordingly, manufacturers’ mood for the coming three months remained apprehensive. Factory payrolls fared poorly in December as there were 33,000 fewer manufacturing jobs compared with November. Employment was down almost 130,000 (-6.2%) compared with December 2006, according a recent Labour Force Survey.

Motor Vehicles Drag Down Sales:

Manufacturing sales of motor vehicles plummeted 24.9 percent to $3.8 billion in December as general weakening of the US economy has contributed to substantial unease in the Canadian automotive sector. The bulk of motor vehicles made in Canada are shipped to the United States.

As a result, Ontario, which is dependant on the vehicle manufacturing sector, led the provinces in reporting decreased sales in December.

The auto industry dragged down Ontario’s manufacturing industries in 2007

Manufacturing sales fell 2.1 percent to $12.1 billion in Quebec, due to widespread declines, including the transportation equipment and wood products industries.

Newfoundland and Labrador (+62.2%), New Brunswick (+1.6%), Manitoba (+0.7%) and Saskatchewan (+1.4%) meanwhile, each reported higher manufacturing sales to end the year.

The ongoing slump in the wood products industry, coupled with a sharp drop in non-metallic mineral products manufacturing, rounded out the top three industries contributing to the decline in December.

Thankfully, though rising prices continued to boost the value of manufacturing sales of the petroleum and coal products industry, keeping the overall manufacturing sector balanced in 2007. In December, factory sales jumped 6.2 percent to $6.3 billion, as some refineries returned to full production.

Aerospace Provides Record Boost to Unfilled Orders:

Rising for the second straight month, unfilled orders increased 2.4 percent, topping the $57.4-billion mark in the aerospace industry. With the exception of a brief two-month dip last fall, unfilled orders have risen unabated for the past 16 months.

In contrast, unfilled orders for computer and electronic products slipped 3.7 percent to $3.5 billion in December.

Meanwhile, new orders cooled considerably, falling 5.6 percent to $50.0 billion, which reversed a significant 8.3 percent rebound in November. New orders have been down in 9 of the past 11 months.