OTTAWA, Ont. — Manufacturing shipments slipped 0.2% to $50.1 billion in December, Statistics Canada reports.

Shipment levels have been gradually weakening since late summer. In constant dollars, shipments fell back for the third time in four months, decreasing 0.8% to $46.8 billion.

Strong global demand, particularly from the United States and China, fuelled Canadian manufacturing over the first eight months of 2004, with shipments reaching record levels by mid-year. Manufacturers capped off the year reporting shipments of $591.7 billion, up 8.4% compared with 2003. This marked the largest annual increase in shipment activity since the most recent booms of 1999 (+16%) and 2000 (+10%).

"Prospects began to turn in the second half of 2004, as the strong value of the Canadian dollar, coupled with high production costs took a toll on the manufacturing sector," Statistics Canada noted in its Daily Bulletin.

The fourth quarter of 2004 ended with a 0.8% drop in shipments. This was the first quarterly decline since the second quarter of 2003, when a sharp drop in petroleum prices, a slowdown in motor vehicle manufacturing, and the start of the mad-cow crisis contributed to a 4.0% decline in manufacturing activity.

The picture doesn’t look much better for the first quarter of 2005. Statistics Canada’s Business Conditions Survey found that manufacturers anticipate lower production and employment levels in the coming months, resulting from dissatisfaction with the current levels of orders and inventories. Just 13% of manufacturers stated that they would increase production in the next three months, down from 21% in the October survey.

New Brunswick (-$105 million), Nova Scotia (-$38 million) and British Columbia (-$36 million) led the six provinces reporting lower shipments in December. Offsetting the declines, Ontario (+$67 million) and Quebec (+$37 million) both had small gains, making up some of the ground lost in November.