OTTAWA, Ont. — Has the economic growth bubble of 2004 already burst? It’s too early to be certain but yesterday’s Statistics Canada reports on the performance of our manufacturing sector and export volumes are cause for concern.

Following eight months of sustained growth in 2004, manufacturing activity has taken a downturn. In October, manufacturers reported fewer shipments for the second month in a row. Finished product inventories also continued to accumulate and fewer new orders were received.

"Canadian manufacturers continued to face several challenges in October and signs suggest momentum has slowed.," Statistics Canada commented in its Daily Bulletin.

Major factors contributing to this reduced activity include the rising value of the Canadian dollar, which reached a 12-year high in late October, and the price of crude oil, which exceeded US $55 per barrel during the month.

Prices for other raw material inputs have also increased substantially. According to the raw materials price index, manufacturers paid 28% more for their inputs in October 2004 compared with one year ago. The rising dollar, combined with high input prices may be limiting manufacturers’ ability to maintain production at levels seen during the early part of 2004.

A high Canadian dollar combined with congestion at Canadian ports are likely the main reason for the fourth consecutive monthly decline in Canadian exports, according to Statistics Canada.

Another indication of slowing manufacturing activity was also seen in the most recent Labour Force Survey. In November, the number of factory jobs declined by 18,000, bringing total job losses in the sector to 52,000 since July 2004.

Manufacturing shipments have also weakened, dropping for two consecutive months.