Lights out for manufacturing shipment volumes in August

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Manufacturing shipments fell 4.5% in August to $40.9 billion, the lowest level since December 2001, Statistics Canada reported this morning.

The aftermath of the electrical blackout in mid-August, which cloaked much of Ontario in darkness, was one of several factors contributing to the decline, the government agency explained.

Shipments in Ontario were particularly hard hit. Canada’s industrial heartland saw its manufacturing shipments drop 7.8% (-$1.8 billion) to $21.2 billion in August. The decrease was notably due to the electrical blackout of August 14 and its lingering impact. In the week that followed, Ontarians were requested to conserve power because of low energy supplies. Large decreases in shipments were reported by several industries, including motor vehicles, chemical products and food manufacturing.

Excluding the significant influence of Ontario from the Canada total, manufacturing shipments decreased 0.8%. Quebec manufacturers posted a 2.6% drop (-$260.0 million) in August, the first since May. The transportation equipment and primary metals industries contributed to the decrease.

The Ontario blackout aside, manufacturers continued to cope with the effects of several short-range but significant shocks in recent months. The Canadian dollar began its ascent at the start of the year. Although the dollar has abated somewhat since the spring, it remains high and continues to jeopardize the profit margins of many Canadian manufacturers reliant on the export market.

In August, Canadian beef remained stalled at the border, as the international ban on exports of beef products continued. The ban was first imposed in late May following the discovery of a single case of bovine spongiform encephalopathy (BSE) in Alberta. In early September, the first shipments of some low-risk cuts of boneless beef crossed the border, as the United States agreed to a partial lifting of the ban.

In addition to these obstacles, market uncertainty remains in the motor vehicle industry. Manufacturers continue to partly gauge production and inventory levels through incentive-induced retail sales. Meanwhile, aerospace manufacturers continue to endure a very depressed global marketplace for new aircraft.

In August, 15 of 21 manufacturing industries, accounting for 68% of total shipments, reported decreases.

Manufacturers of both durable and non-durable goods posted declines.

Shipments of big-ticket durable goods fell 7.1% to $22.8 billion, the sixth decrease thus far in 2003. Non-durable goods shipments fell back 1.1%, wiping out July’s 0.5% gain.

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